Accounting Principles II
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Course Introduction
Accounting Principles II builds upon the foundational concepts learned in introductory accounting courses, with a focus on the application and analysis of accounting principles for corporations. This course covers advanced topics such as accounting for long-term assets and liabilities, shareholders equity, statement of cash flows, financial statement analysis, and an introduction to managerial accounting concepts. Students will develop skills to interpret and analyze financial information, enhance their understanding of accounting processes, and apply accounting knowledge to real-world business scenarios, preparing them for further studies in accounting or finance-related fields.
Recommended Textbook
Financial Accounting 2nd Edition by J.
David Spiceland
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Page 2
Chapter 1: Accounting Information and Decision Making
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Sample Questions
Q1) Financial accounting does not deal with which of the following?
A)Measuring a company's economic activity.
B)Preparing financial reports.
C)Making business decisions.
D)Communicating financial results to investors.
Answer: C
Q2) The statement of stockholders' equity is a financial statement that summarizes the changes in stockholders' equity over an interval of time.
A)True
B)False
Answer: True
Q3) Dividends are considered an expense in running the business and reported in the income statement.
A)True
B)False
Answer: False
Q4) A corporation is an entity that is legally separate from its owners.
A)True
B)False
Answer: True
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Chapter 2: The Accounting Information System
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Sample Questions
Q1) Which of the following is not possible when recording a transaction?
A)Liabilities increase and assets decrease.
B)Stockholders' equity increases and assets increase.
C)One asset increases and another asset decreases.
D)Stockholders' equity decreases and assets decrease.
Answer: A
Q2) A company provides services to customers on account,$3,500.Record the transaction.
Answer: Accounts Receivable \(\quad 3,500\) Service Revenue\(\quad 3,500\)
Q3) A trial balance represents the:
A)Source documents used to determine the effects of transactions on the company's accounts.
B)List of all accounts and their balances at a particular date to ensure that debits equal credits.
C)Chronological record of all transactions affecting the company.
D)Process of transferring debit and credit information from the journal to the accounts in the general ledger.
Answer: B
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Page 4
Chapter 3: The Financial Reporting Process
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Sample Questions
Q1) Air France collected cash on February 4 from the sale of a ticket to a customer on January 26.The flight took place on April 5.According to the revenue recognition principle,in which month should Air France have recognized this revenue?
A)January.
B)February.
C)April.
D)Evenly in each of the three months.
Answer: C
Q2) When a company prepares closing entries,which one of the following is NOT a correct closing entry?
A)Debit Retained Earnings; credit Salaries Expense.
B)Debit Dividends; credit Retained Earnings.
C)Debit Service Revenue; credit Retained earnings.
D)All of the above are correct.
Answer: B
Q3) What is an accrued expense?
Answer: An accrued expense results from an expense being incurred and a liability recorded prior to cash payment.Examples include interest payable and salaries payable.
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Chapter 4: Cash and Internal Controls
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Sample Questions
Q1) The petty cash fund represents cash on hand and is used to pay for minor purchases.
A)True
B)False
Q2) Which of the following would NOT represent good controls over cash receipts?
A)Record all cash receipts as soon as possible.
B)The employee that receives cash and checks should also deposit them in the bank.
C)Open mail each day and make a list of checks received with the amount and payer's name.
D)Verify cash receipts by comparing the bank deposit slip with the accounting records.
Q3) The final step in reconciling the bank's cash balance and the company's cash balance is to update the company's cash balance for the items used to reconcile the bank's cash balance.
A)True
B)False
Q4) Only transactions involving cash affect a company's cash flows.
A)True
B)False
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Chapter 5: Receivables and Sales
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Sample Questions
Q1) Accrued interest on a note receivable is interest earned by the end of the year but not yet received.
A)True
B)False
Q2) On August 12,a company provides services on account to a customer for $3,000.However,on August 16,the customer is not completely satisfied with the service and the company grants an allowance on the amount owed of $400.On August 20,the customer makes full payment of the balance owed,excluding the allowance.Record the services provided on August 12,the sales allowance on August 16,and the cash collection on August 20.
Q3) From an income statement perspective,the percentage-of-credit-sales method is typically preferable because it better matches the revenues (credit sales)with their related expenses (bad debts).
A)True
B)False
Q4) Accounts receivable are reported at their net realizable value.
A)True
B)False
Q5) What does it mean to report accounts receivable at their net realizable value.
Page 7
Q6) Explain how companies account for uncollectible accounts receivable (bad debts).
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Chapter 6: Inventory and Cost of Goods Sold
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Sample Questions
Q1) A company begins the year with inventory of $50,000 and ends the year with inventory of $55,000.During the year,the following amounts are recorded: \[\begin{array} { l r }
\text { Purchases } & \$ 210,000 \\
\text { Purchase returns } & 25,000 \\
\text { Purchase discounts } & 15,000 \\
\text { Freight-in } & 40,000 \end{array}\]
Calculate cost of goods sold for the year.
Q2) What effect would an adjustment to record inventory at the lower-of-cost-or-market have on the company's financial statements?
A)An increase to assets.
B)An increase to stockholders' equity.
C)A decrease to revenue.
D)An increase to expense.
Q3) When inventory costs are declining,__________ generally results in a lower amount of reported inventory.
Q4) What does it mean that FIFO has a balance sheet focus and LIFO has an income statement focus?
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Chapter 7: Long-Term Assets
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Sample Questions
Q1) Strawberry Fields purchased a tractor at a cost of $38,000 and sold it two years later for $25,000.Strawberry Fields recorded depreciation using the straight-line method,a five-year service life,and an $8,000 residual value.What was the gain or loss on the sale? Record the sale.
Q2) Book value is equal to the original cost of the asset minus the current balance in Accumulated Depreciation.
A)True B)False
Q3) Aspen,Inc.developed a new horse transport device and incurred research and development costs of $250,000.Rather than continue with their own research,Aspen decided to purchase a patent for a similar design from Vail,Inc.for $350,000.What are the total assets and expenses for these developments?
A)Assets $600,000; Expenses $0. B)Assets $250,000; Expenses $350,000. C)Assets $350,000; Expenses $250,000. D)Assets $0; Expenses $600,000.
Q4) Why don't we depreciate land? What are land improvements? Why do we record land and land improvements separately?
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Page 9
Chapter 8: Current Liabilities
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Sample Questions
Q1) The current ratio is calculated by dividing current liabilities by current assets.
A)True
B)False
Q2) Why is it important to distinguish between current and long-term liabilities?
Q3) Which of the following is not a reason why a company might prefer to report a liability as long-term rather than current?
A)It may cause the firm to appear less risky to investors and creditors.
B)It may increase interest rates on borrowing.
C)It may cause the company to appear more stable commanding a higher stock price for new stock listings.
D)It may reduce interest rates on borrowing.
Q4) The current ratio is
A)Current assets divided by current liabilities.
B)Cash and short-term investments divided by current liabilities.
C)Cash,short-term investments,and accounts receivable divided by current liabilities.
D)Cash,short-term investments,accounts receivable,and inventory divided by current liabilities.
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Chapter 9: Long-Term Liabilities
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Sample Questions
Q1) For the issuer of 20-year bonds,the carrying value using the effective interest method would decrease each year if the bonds were sold at a:
\[\begin{array}{l}
\begin{array} { c c }
&\text { Discount } & \text { Premium } \\
a.&\text { No } & \text { No } \\
b.&\text { No } & \text { Yes } \\
c.&\text { Yes } & \text { Yes } \\
d.&\text { Yes } & \text { No }
\end{array}
\end{array}\]
A)Option a
B)Option b
C)Option c
D)Option d
Q2) Term bonds require payments in installments over a series of years.
A)True
B)False
Q3) Why do some companies issue bonds rather than borrow money directly from a bank?
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) Paid-in Capital is the amount stockholders have invested in the company.
A)True
B)False
Q2) No journal entry is made to record a stock split.
A)True
B)False
Q3) Issued stock refers to the number of shares:
A)Outstanding plus treasury shares.
B)Authorized.
C)In the hand of stockholders.
D)That may be issued under state law.
Q4) We calculate earnings per share as net income divided by the average shares outstanding during the period.
A)True
B)False
Q5) Both cash dividends and stock dividends:
A)reduce total assets.
B)reduce total liabilities.
C)reduce total stockholders' equity.
D)reduce retained earnings.
Page 12
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Chapter 11: Statement of Cash Flows
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Sample Questions
Q1) The purchase of treasury stock is classified in the statement of cash flows as a(n):
A)Operating activity.
B)Investing activity.
C)Financing activity.
D)Noncash activity.
Q2) Cash flows from financing activities include:
A)Interest received.
B)Interest paid.
C)Dividends received.
D)Dividends paid.
Q3) Which of the following is an example of a noncash activity?
A)Sale of land for less than its cost.
B)Purchase of land by issuing debt.
C)Sale of land for more than its cost.
D)Purchase of land using cash proceeds from issuance of common stock.
Q4) A statement of cash flows provides a summary of cash inflows and cash outflows during the reporting period.
A)True
B)False
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) Return on assets is calculated as net income divided by ending total assets.
A)True
B)False
Q2) Stealth Company's 2013 asset turnover is:
A)3.7 times.
B)2.8 times.
C)2.2 times.
D)0.5 times.
Q3) Value stocks have lower share prices in relationship to their fundamental ratios,and therefore,trade at lower PE ratios.
A)True
B)False
Q4) We use horizontal analysis to analyze trends in financial statement data,such as the dollar amount of change and the percentage change,for one company over time.
A)True
B)False
Q5) If a company's sales are $648,000 in 2012,and this represents an 8% increase over sales in 2011,what were sales in 2011?
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Chapter 13: Time Value of Money
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Q1) Future value is how much an amount today will grow to be in the future.
A)True
B)False
Q2) An annuity is a series of equal cash payments over equal time intervals.
A)True
B)False
Q3) Present value indicates how much a present amount of money will grow to in the future.
A)True
B)False
Q4) What is the value today of receiving $2,500 at the end of three years,assuming an interest rate of 9% compounded annually?
A)$1,984.
B)$1,930.
C)$2,104.
D)$3,238.
Q5) If you had an investment opportunity that promises to pay you $20,000 in three years and you could earn a 10% annual return investing your money elsewhere,what is the most you should be willing to invest today in this opportunity?
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Chapter 14: Investments
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Sample Questions
Q1) Unrealized gains and losses from changes in the fair value of available-for-sale securities are reported as part of current net income.
A)True
B)False
Q2) On January 1,2012,Gilman Company purchased 10,000 of the 200,000 shares of common stock of Burke Corporation at $40 per share as a long-term investment.The records of Burke Corporation showed the following at December 31,2012:
\[\begin{array} { | l | l | }
\hline \text { Net Income } & \$ 500,000 \\
\hline \text { Dividends Paid } & \$ 200,000 \\
\hline \text { Market Price per Share } & \$ 38 \\
\hline
\end{array}\]
What amount should Gilman Company report in its December 31,2012,balance sheet for its investment in Burke?
A)$380,000.
B)$400,000.
C)$415,000.
D)$425,000.
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Page 16
Chapter 15: International Financial Reporting Standards
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Sample Questions
Q1) When preparing a statement of cash flows,IFRS allows companies to report cash inflows from interest and dividends as either operating or investing cash flows,while U.S.GAAP requires these inflows to be reported as only operating activities.
A)True
B)False
Q2) Compared to that in the U.S,the cost to companies in other countries of documenting effective internal controls is:
A)Much greater.
B)Slightly greater.
C)About the same.
D)Much less.
Q3) IFRS allows,but does not require,revaluation of property,plant and equipment to fair value.
A)True
B)False
Q4) Convergence of accounting practices is expected to increase the flow of investment across borders.
A)True
B)False
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