Accounting and Financial Reporting Final Exam
Course Introduction
This course provides a comprehensive introduction to the fundamental principles and practices of accounting and financial reporting. Students will explore key concepts such as the accounting cycle, preparation and analysis of financial statements, and the role of accounting in organizational decision-making. The course covers standards and regulations, including Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), emphasizing the importance of transparency, accuracy, and ethical considerations in financial reporting. Through real-world case studies and practical exercises, students gain valuable skills for interpreting financial information and understanding its impact on business operations.
Recommended Textbook
Financial Accounting 15th Edition by Jan Williams
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Page 2
Chapter 1: Accounting: Information for Decision Making
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Sample Questions
Q1) Which of the following is generally not considered an external user of accounting information?
A) Stockholders of a corporation.
B) Bank lending officers.
C) Financial analysts.
D) Factory managers.
Answer: D
Q2) AICPA Code of Professional Conduct
State and discuss the six articles of the AICPA Code of Professional Conduct that guide members in performing their professional responsibilities. Answer: (I.) Responsibilities
(II.) The Public Interest
(III.) Integrity
(IV.) Objectivity and Independence
(V.) Due Care
(VI.) Scope and Nature of Services
Q3) The timeliness of the information is more critical than its completeness. Answer: Management
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3
Chapter 2: Basic Financial Statements
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Sample Questions
Q1) Assume the Equipment shown above was acquired by the business five years ago and has a book value of $156,000, but has a current appraised value of $200,000.
Hercules Manufacturing's Retained Earnings at December 31, 2010, amounts to:
A) $533,000.
B) $345,000.
C) $198,000.
D) $356,000.
Answer: C
Q2) The owner of a sole proprietorship is personally liable for the debts of the business, whereas the stockholders of a corporation are not personally liable for the debts of the business.
A)True
B)False Answer: True
Q3) The accounting equation may be stated as "assets minus liabilities equals owners' equity."
A)True
B)False Answer: True
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Page 4
Chapter 3: The Accounting Cycle: Capturing Economic Events
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Sample Questions
Q1) On January 5, 2012, total liabilities are:
A) $0.
B) $579,000.
C) $1,399,000.
D) $1,721,000.
Answer: B
Q2) Every transaction which affects an income statement account also affects a balance sheet account.
A)True
B)False
Answer: True
Q3) What is the total of Precision's liabilities at the end of June?
A) $70,000.
B) $110,000.
C) $200,000.
D) $240,000.
Answer: B
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Page 5
Chapter 4: The Accounting Cycle: Accruals and Deferrals
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Q1) Dolphin Co. received $1,500 in fees during 2009, 1/3 of which was earned in 2010, the rest was earned when received. The company should report which of the following amounts as income in 2009?
A) $1,500.
B) $500.
C) $1,000.
D) $0.
Q2) Every adjusting entry involves the recognition of either revenue or owner's equity.
A)True
B)False
Q3) Companies that engage in fraud will often capitalize an asset rather than an expense account.
A)True
B)False
Q4) Which of the following activities is least likely to be limited to "year-end"?
A) Closing the accounts.
B) Drafting notes to accompany statements.
C) Recording routine transactions.
D) Undergoing an audit.
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Chapter 5: The Accounting Cycle: Reporting Financial
Results
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Sample Questions
Q1) Publicly traded companies must file audited financial statements with the: A) AICPA.
B) IRS.
C) SEC.
D) AAA.
Q2) Refer to the information above. Income Summary will have what balance before it is closed?
A) Zero.
B) $11,750.
C) $7,250.
D) $11,000.
Q3) The report form of the balance sheet lists liabilities and owners' equity below assets.
A)True
B)False
Q4) In regard to disclosures that are required to be contained in annual reports, the FASB has no well-defined list of items that must be included.
A)True
B)False
Page 7
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Chapter 6: Merchandising Activities
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Sample Questions
Q1) The cost of the transportation of inventory purchased:
A) Are expensed in the current period.
B) Increases income.
C) Becomes part of the cost of inventory.
D) Reduces the sales price.
Q2) In a perpetual inventory system:
A) Merchandising transactions are recorded as they occur.
B) No effort is made to record the Cost of Goods Sold until year-end.
C) Entries are made in the Cost of Goods Sold account whenever merchandise is purchased or sold.
D) The need for ever taking physical inventory is eliminated.
Q3) The average gross profit margin is a measure of relative profitability.
A)True
B)False
Q4) What is the gross profit?
A) $9,800
B) $33,600
C) $32,200
D) $43,400
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Chapter 7: Financial Assets
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Q1) Hubbard Transport keeps $500 cash on hand in addition to this checking account and has no other bank accounts or cash equivalents. What amount should appear as Cash in Emerald's August 31 balance sheet?
A) $18,430.
B) $14,249.
C) $17,955.
D) Some other amount.
Q2) Cash management
(a.) What is meant by the term "cash management"?
(b.) Identify at least three basic objectives of effective cash management.
Q3) Petty cash fund
E-Z Productions established a petty cash fund of $650 on January 1. On January 28, the fund was replenished for the payments made to date as shown by the following petty cash vouchers: postage, $145; telephone expense, $62.80; repairs, $79.20; office supplies, $67.20; and miscellaneous expense, $56. Prepare journal entries in general journal form to record the establishment of the fund on January 1 and its replenishment on January 28.
Q4) What is the adjusted cash balance in the September 30 bank reconciliation?
Q5) What is the amount of the deposit in transit?
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Chapter 8: Inventories and the Cost of Goods Sold
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Sample Questions
Q1) With respect to the valuation of inventory and measurement of the cost of goods sold, the principle of consistency means that the same method should be applied:
A) In successive accounting periods.
B) By all companies in a given industry.
C) To all products in the inventory.
D) In financial statements and income tax returns.
Q2) Assume that the replacement cost of this monitor at year-end is $220 per unit. Using the FIFO flow assumption and the lower-of-cost-or-market rule, Castle TV should write down the carrying value of this inventory by:
A) $0.
B) $1,000.
C) $2,000.
D) $3,000.
Q3) During periods of inflation, the specific identification cost flow assumption will yield a higher cost of goods sold than LIFO.
A)True B)False
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Chapter 9: Plant and Intangible Assets
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Sample Questions
Q1) Various depreciation methods-first year
On March 24, 2009 Tastee Ice Cream Co. purchased equipment costing $140,000, with an estimated life of 5 years and an estimated salvage value of $20,000. Compute the depreciation expense Tastee would recognize on this equipment in 2009, assuming: \[\begin{array} { | l | l | }
\hline \text { (a) Straight-line depreciation using the half-year convention } & \$ \underline{\quad\quad}\\
\hline \text { (b) } 200 \% \text { declining balance with fractional periods } & \\
\hline \text { rounded to the nearest full month. } & \$ \underline{\quad\quad}\\
\hline \text { (c) } 150 \% \text {-declining-balance, using the half-year convention } & \$ \underline{\quad\quad}\\
\hline
\end{array}\]
Q2) Compute the book value of the stallion at May 31, 2009, the date of sale.
Q3) Compute the gain or loss on the sale of the stallion. $______________ (gain/loss)
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Chapter 10: Liabilities
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Sample Questions
Q1) Which of the following is an example of a contingent liability?
A) A lawsuit pending against a restaurant chain for improper storage of perishable food items.
B) The liability for future warranty repairs on computers sold during the current period.
C) A corporation's long-term employment contract with its chief executive officer.
D) A liability for notes payable with interest included in the face amount.
Q2) On October 1, Dalton Corp. borrows $100,000 from National Bank, signing a six-month note payable for that amount, plus interest to be computed at a rate of 9% per annum. Indicate all correct answers.
A) Dalton's liability at October 1 is only $100,000.
B) The maturity value of this note is $104,500.
C) At December 31, Dalton will have a liability for accrued interest payable in the amount of $4,500.
D) Dalton's total liability for this loan at November 30 is $101,500.
Q3) Loss contingencies stem from past events.
A)True
B)False
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Page 12
Chapter 11: Stockholders Equity: Paid-In Capital
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Sample Questions
Q1) If preferred stock is convertible, it is so at the option of the:
A) Board of directors.
B) CEO.
C) CFO.
D) Stockholders.
Q2) Contributed capital is equivalent to paid-in capital.
A)True
B)False
Q3) The book value per share of common stock is:
A) $7.90.
B) $13.17.
C) $9.10.
D) $15.17.
Q4) Which of the following is not a characteristic of the common stock of a large, publicly owned corporation?
A) The shares may be transferred from one investor to another without disrupting the continuity of business operations.
B) Voting rights in the election of the board of directors.
C) A cumulative right to receive dividends.
D) After issuance, the market value of the stock is unrelated to its par value.
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Chapter 12: Income and Changes in Retained Earnings
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Sample Questions
Q1) In computing earnings per share, the number of shares used is:
A) The year-end number of shares outstanding.
B) The beginning of the year number of shares outstanding.
C) The average of the beginning and the year-end number of shares outstanding.
D) The weighted average of shares outstanding for the year.
Q2) Retained earnings
At the beginning of 2009, Falcon Corporation had 2 million shares of $2 par value common stock outstanding and retained earnings of $17 million. During 2009, Falcon earned $12 million, declared a 5% stock dividend when the price of the stock was $19 per share, and paid a year-end cash dividend of $2.50 per share. (The cash dividend was declared after the stock dividend had been distributed.) At the end of 2009, what are the company's retained earnings?
Q3) Extraordinary items are found on the income statement:
A) Before discontinued operations.
B) After discontinued operations.
C) Before income from continuing operations.
D) After prior period adjustments.
Q4) "Discontinued operations" is an example of an extraordinary item.
A)True
B)False
Page 14
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Chapter 13: Statement of Cash Flows
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Q1) Depreciation expense reduces net income but does not reduce the net cash flow from operating activities.
A)True
B)False
Q2) The cash proceeds received by Kenny Corporation in 2010 for the sale of marketable securities was:
A) $230,000.
B) $280,000.
C) $195,000.
D) $180,000.
Q3) Which of the following is not classified among the operating activities in a statement of cash flows?
A) Payment of interest on a bank loan.
B) Payment of the principal amount owed on a bank loan.
C) Payment of an account payable to a merchandise supplier.
D) Payment of income taxes.
Q4) In a statement of cash flows, the term cash includes both cash and cash equivalents.
A)True
B)False
Page 15
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Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) A company whose sales are growing at less than the rate of inflation may actually be selling less merchandise every year.
A)True
B)False
Q2) Current assets are those assets that can be converted into cash within:
A) One year and never longer.
B) One year or the operating cycle, whichever is longer.
C) One year or the operating cycle, whichever is shorter.
D) Management's discretion.
Q3) The return on equity ratio usually is computed as:
A) Net income divided by average total assets.
B) Net income divided by average total stockholders' equity.
C) Gross profit divided by average total stockholders' equity.
D) Net income less preferred dividends, divided by average common stockholders' equity.
Q4) Noble's operating income was:
A) $1,610.
B) $675.
C) $935.
D) $115.
Page 16
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Chapter 15: Global Business and Accounting
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Q1) A wholly owned international subsidiary exists when a company owns 100% of the equity in a U.S. foreign subsidiary.
A)True
B)False
Q2) The standards issued by the International Accounting Standards Board must be followed by all multinational companies.
A)True
B)False
Q3) On November 1, a French company purchased machinery from an American company for 800,000 euros when the exchange rate was $0.83. When preparing financial statements on December 31, assuming the rate for Euros was $0.88, what amount of gain or loss should the American company report?
A) $40,000 gain.
B) $40,000 loss.
C) $19,000 gain.
D) No gain or loss would be reporteD. 800,000 x ($0.88 - $0.83) = $40,000 gain
Q4) Accounting as a profession did not exist in England prior to 1988.
A)True
B)False
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Chapter 16: The Time Value of Money
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Q1) Explain how compound interest applies to the time value of money.
Q2) Future value is the amount that must be invested today at a specific interest rate to receive a particular amount at some future date.
A)True
B)False
Q3) How much must I invest today in order to have $25,000 in 5 years assuming 12% interest compounded annually?
A) $14,185.75.
B) $15,888.00.
C) $18,681.50.
D) $17.624.00.
Q4) The present value of a single amount can only be calculated through the application of complex calculations.
A)True
B)False
Q5) Sam Rivers has $3,000 to invest. He must decide whether to invest this money for five years at 10% compounded semi-annually or at 12% compounded annually. Which option should he select?
Q6) Explain what is meant by the "time value of money." Provide examples.
Page 18
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