Final Exam Review
The exam will have 36 questions, 3 points each, total of 108 points.
Forty percent (40%) will cover chapter 17; Sixty percent (60%) will cover information from Tests 1, 2, and 3.
Expect questions on the exam focusing on the following topics from each exam.
Test 1 – 3 questions
-Know how to work your way through the Multi-Step Income Statement – calculating subtotals along the way.
-Be able to identify all the Other Comprehensive Income adjustments [3 of them]
-How do we calculate Comprehensive Income?
-What type of an account is Accumulated Other Comprehensive Income? How would you define this account?
Test 2 – 11 questions
-Know how to estimate Bad Debt Expense for the period using the Income Statement or Balance Sheet approach.
-How do we calculate the Net Realizable Value of Accounts Receivable?
-Know how to record the journal entry for selling Accounts Receivables on a With or Without Recourse basis.
-Know how account for a Non-Interest Bearing Notes Receivable – calculating interest revenue using the Effective
Interest method. Know how to prepare the journal entries over the life of the note.
-Know how to assign costs to Ending Inventory or Goods Sold to customers using any of the Cost Flow Assumptions
[LIFO, FIFO, WA] – for either a Perpetual or a Periodic Inventory system.
-If Ending Inventory is over stated or under stated in a Periodic inventory system, how does that affect all the elements of the financial statements in the year of the error and again the next year?
-Dollar Value LIFO…. Know how to work through a Dollar Value LIFO calculation.
-Know how to adjust Inventory to the Lower of Cost or Market. Understand how we get the Market Value – given the
Net Realizable Value [Ceiling], Replacement Cost, and the Net Realizable Value Less a Profit Margin [Floor]. Remember,
Replacement Cost will not be chosen as market if it is greater than the ceiling or less than the floor.
-Know how to get an estimation of Ending Inventory using the Gross Profit Method. Don’t forget, if given the % Markup on Cost, you must convert that to the % Markup on Sales [aka, the Gross Profit Margin %].
-Know how to get an estimation of Ending Inventory and Cost of Goods Sold using each of the three variations of the
Retail Method – Conventional Retail, LIFO Retail, and Dollar Value LIFO Retail.

Test 3 – 8 questions
-When we have a purchase of real estate [Land], know what costs are capitalized to Land, Building, or Land
Improvement accounts. Remember to net out [from Land costs] proceeds you receive from sales of scrap that came off the Land.
-Exchange of Non-Monetary Assets – Know how to handle transactions that Have Commercial Substance vs transactions that Lack Commercial Substance. Know when we can defer a gain, and when we can’t. If we can defer a gain - how much can we defer, and how.
-Capitalization of Interest for Assets under construction. Know how to calculate Avoidable Interest. How much will we capitalize, and how much must be expensed?
-Know how to calculate Depreciation Expense for any given year using Double Declining Balance and/or Sum of Years
Digits methods – pay attention to dates for partial period calculations.
-Know how to calculate the Book Value of an asset on any given date.
-Know how to calculate a Gain or Loss on the sale of an asset.
-Impairment Losses – Know how to go through the Recoverability Test [comparing the Book Value of an asset to
Expected Future Cash Flows]. Remember, if Expected Future Cash Flows are less than the Book Value, then you are unable to recover the Book Value of the asset. It fails the Recoverability Test, and there is an Impairment Loss.
HOWEVER, if Expected Future Cash Flows are greater than the Book Value, you are still able to recover the Book Value of the asset. In that case, it passes the Recoverability test, and there is NO impairment loss. Be sure to work through the Recoverability Test on these questions.
Chapter 17 – 14 questions
-Debt and Equity Investments are grouped within three categories – Trading, Available For Sale, and Held To Maturity.
-Which of those Investment groups are reported on the Balance Sheet at Amortized Cost, and which are reported at Fair
Value.
-Unrealized Gains and Losses that result from adjusting Trading securities to Fair Value will be reported where [as
Income or Other Comprehensive Income]?
-Unrealized Gains and Losses that result from adjusting Available For Sale securities to Fair Value will be reported where [as Income or Other Comprehensive Income]?
-At the end of the year, we close out Unrealized Gains and Losses for Trading securities to what Equity account
[Retained Earnings or Accumulated Other Comprehensive Income]?
-At the end of the year, we close out Unrealized Gains and Losses for Available For Sale securities to what Equity
account [Retained Earnings or Accumulated Other Comprehensive Income]?

-Know how to set up an Amortization schedule for a Bond Investment – whether purchased at a Discount or at a
Premium – using the Effective Interest Method.
-Know how to record the journal entries for a Bond Investment at the purchase date and at the date interest payments are received.
-Be able to answer questions about the Bond Investment such as: 1) How much total interest revenue will be recognized on the investment in a given year? 2) What is the carrying value of the Bond investment at a given date?
-When the Market Rate of the Bond is greater than the Stated Rate at the date of purchase, will the Bond be purchased at a Discount or Premium? When the Market Rate of the Bond is less than the Stated Rate, will the Bond be purchased at a Discount or Premium?
-When we amortize a Discount on a Bond Investment, will the carrying value of the Bond increase or decrease with each interest payment period? When we amortize a Premium on a Bond Investment, will the carrying value of the
Bond increase or decrease with each interest payment period?
-Given a Bond purchased at a Discount, will Interest Revenue reported each year on the Bond Investment be greater
than or less than the Cash Interest payments received? Given a Bond purchased at a Premium, will Interest Revenue reported each year on the Bond Investment be greater than or less than the Cash Interest payments received?
-What criteria must be met for a Bond Investment to be categorized as Held To Maturity?
-Equity Securities – When we own < 20% of total shares of the Investee company, we use the Fair Value Method to account for those investments. Know how to go through the journal entries for common transactions using the Fair
Value method. Pay attention to what the journal entries are doing.
-Equity Securities – When we own < 20% of total shares of the Investee company, we group those Equity Investments between Trading or Available For Sale – and we mark each to Fair Value at the end of the period.
-Equity Securities – When we own 20%-50% of total shares of the Investee company, we use the Equity Method to account for those investments. Know how to go through the journal entries for common transactions using the Equity method. Pay attention to the differences between the Fair Value method and the Equity method.
-When we sell a Bond or Equity Investment for cash, we capture and report a Realized Gain or Loss. All Realized Gains or Losses are reported on the Income Statement in the Non-Operating section.
****NO IFRS questions on the final exam