Advanced Accounting Practice Exam
Course Introduction
Advanced Accounting delves into complex financial reporting issues and the application of accounting principles to business combinations, consolidated financial statements, partnerships, foreign currency transactions, and non-profit organizations. The course builds on foundational accounting concepts and explores specialized accounting topics such as mergers and acquisitions, intercompany transactions, segment reporting, and international accounting standards. Emphasis is placed on analysis, regulatory requirements, and ethical considerations in advanced financial reporting to prepare students for upper-level professional accounting roles and certification exams.
Recommended Textbook
Financial Statement Analysis 13th Edition by Charles H. Gibson
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Page 2
Chapter 1: Introduction to Financial Reporting
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Sample Questions
Q1) The going concern assumption:
A)is applicable to all financial statements.
B)primarily involves periodic income measurement.
C)allows for the statements to be prepared under generally accepted accounting principles.
D)requires that accounting procedures be the same from period to period.
E)none of the answers are correct.
Answer: C
Q2) Reporting under Sarbanes-Oxley revealed that very few companies had material weaknesses in their controls and processes.
A)True
B)False
Answer: False
Q3) The cash basis recognizes revenue when cash is received and expenses when cash is paid.
A)True
B)False
Answer: True
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Chapter 2: Introduction to Financial Statements and Other Financial Reporting Topics
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Sample Questions
Q1) Summarizes the results of operations for a particular period of time.
A)income statements
B)notes
C)balance sheet
D)statement of cash flows
E)statement of retained earnings (reconciliation of retained earnings)
Answer: A
Q2) Smith Company had retained earnings of $60,000 at the end of the current year.For the current year,income was $30,000 and dividends $10,000.What was the balance in retained earnings at the end of the prior year?
A)$30,000
B)$40,000.
C)$60,000
D)$30,000.
E)$70,000
Answer: B
Q3) There are three methods of accounting for a business combination.
A)True
B)False
Answer: False
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Chapter 3: Balance Sheet
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Sample Questions
Q1) Which of the following is not a problem inherent in balance sheet presentation?
A)Most assets are valued at cost.
B)Varying methods are used for asset valuation.
C)Not all items of value to the firm are included as assets.
D)Liabilities related to contingencies may not appear on the balance sheet.
E)The owners' interest will be indicated.
Answer: E
Q2) Bonds Payable
A)Current Assets
B)Tangible Assets
C)Investments
D)Intangibles
E)Other
F)Current Liability
G)Long-Term Liability
H)Capital Stock
I)Retained Earnings
J)Item Not Included on Balance Sheet
Answer: G
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Chapter 4: Income Statement
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Q1) Fisher Company has 1,000,000 share of common stock with a par value of $10.Additional paid-in capital totals $10,000,000 and retained earnings is $12,000,000.The directors declare a 6% stock dividend when the market value is $5.The reduction of retained earnings as a result of the declaration will be:
A)$0.
B)$300,000.
C)$600,000.
D)$500,000.
E)None of the answers are correct.
Q2) Other income and other expense are categories under which secondary activities of the firm not directly related to the operations are classified.
A)True
B)False
Q3) Comprehensive income is net income plus the periods change in accumulated other comprehensive income.
A)True
B)False
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Chapter 5: Basics of Analysis
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Sample Questions
Q1) The descriptive information in annual reports is not useful in statement analysis;only the financial statements themselves are of value.
A)True
B)False
Q2) Denver Dynamics has net income of $2,000,000.Oakland Enterprises has net income of $2,500,000.Which of the following best compares the profitability of Denver and Oakland?
A)Oakland Enterprises is 25% more profitable than Denver Dynamics.
B)Oakland Enterprises is more profitable than Denver Dynamics,but the comparison can't be quantified.
C)Oakland Enterprises is only more profitable if it is smaller than Denver Dynamics.
D)Further information is needed for a reasonable comparison.
E)Oakland Enterprises is more profitable if it is a larger firm than Denver Dynamics.
Q3) A service firm will usually have a low amount of inventory,consisting primarily of supplies.
A)True B)False
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Chapter 6: Liquidity of Short-Term Assets;related
Debt-Paying Ability
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Sample Questions
Q1) Company A uses LIFO and Company B uses FIFO for inventory valuation.Otherwise,the firms are of similar size and have the same revenue and expense.Assume inflation.In analyzing liquidity and profitability of the two firms,which of the following will hold true?
A)It is impossible to compare two firms with different inventory methods.
B)Company B will have relatively higher profit and higher inventory turnover.
C)Company B will have relatively higher profit and lower inventory turnover.
D)Company A will have a higher current ratio and acid test ratio,with the same profit.
E)Company B will have relatively higher profit and a higher current ratio.
Q2) If the company closes the year when the activities are at a peak,the number of days' sales in inventory would tend to be overstated and the liquidity would be overstated.
A)True B)False
Q3) Working capital of a business is the excess of current assets over current liabilities. A)True B)False
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Chapter 7: Long-Term Debt-Paying Ability
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Q1) As with the debt ratio and the debt/equity ratio,from a long-term,debt-paying ability view,the lower the debt to tangible net worth ratio,the better.
A)True
B)False
Q2) Noncontrolling shareholders' interest in earnings of subsidiaries are included in earnings for the times interest earned coverage.
A)True
B)False
Q3) A fixed charge coverage:
A)is a balance sheet indication of debt carrying ability.
B)is an income statement indication of debt carrying ability.
C)is a liquidity ratio.
D)frequently includes research and development.
E)computation is standard from firm to firm.
Q4) A good times interest earned record would be indicated by a relatively high,stable coverage for the times interest earned coverage.
A)True
B)False
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9
Chapter 8: Profitability
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Sample Questions
Q1) Which of the following ratios will usually have the lowest percent?
A)Return on investment
B)Return on total equity
C)Return on common equity
D)Return on total assets
E)There is not enough information to tell
Q2) Interim reports are usually audited.
A)True
B)False
Q3) Which of the following could cause return on assets to decline when net profit margin is increasing?
A)Sale of investments at year-end
B)Increased turnover of operating assets
C)Decline in book value
D)A stock split
E)Purchase of a new building at year-end
Q4) Return on investment measures the return on long-term suppliers of funds.
A)True
B)False
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Chapter 9: For the Investor
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Sample Questions
Q1) Some employees prefer restricted stock over options because they receive actual shares of stock.
A)True
B)False
Q2) Total earnings from securities include both dividends and price appreciation.
A)True
B)False
Q3) The use of financing with a fixed charge (such as interest)is termed financial leverage.
A)True
B)False
Q4) \(\frac { \text { Net Income - All Dividends} } { \text { Net Income}}\)
A)degree of financial leverage
B)basic earnings per common share
C)price/earnings ratio
D)percentage of earnings retained
E)dividend payout
F)dividend yield
G)book value per share
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Chapter 10: Statement of Cash Flows
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Sample Questions
Q1) Working capital is defined as:
A)total assets less intangible assets.
B)current assets divided by current liabilities.
C)current assets less current liabilities.
D)total assets less current assets.
E)current assets less liabilities.
Q2) Collection of accounts receivable
A)Operating
B)Investing
C)Financing
D)Item would not appear
Q3) Issuance of bonds payable for cash
A)Operating
B)Investing
C)Financing
D)Item would not appear
Q4) Depreciation expense reduces operating income but does not require the use of cash.
A)True
B)False
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Chapter 11: Expanded Analysis
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Q1) Presently,no regulatory agency,such as the Securities and Exchange Commission or the Financial Accounting Standards Board,accepts responsibility for determining either the content of financial ratios or the format of presentation in annual reports.
A)True
B)False
Q2) Substantial research and development will result in more conservative earnings.
A)True
B)False
Q3) There are many practical and theoretical issues related to the computation of financial ratios.
A)True
B)False
Q4) In financial accounting,which of the following assets is not considered to be an intangible asset?
A)Goodwill
B)Patents
C)Copyrights
D)Trademarks
E)Accounts receivable
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Chapter 13: Personal Financial Statements and Accounting
for Governments and Not-For-Profit Organizations
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Q1) Under governmental accounting,a fund is defined as a fiscal and accounting entity with a self-balancing set of accounts.
A)True
B)False
Q2) Which of the following would not be a source of information for personal financial statements?
A)Broker's statements
B)Income tax returns
C)Safe deposit box
D)Checkbook
E)All of the answers would be a source of information.
Q3) Under GASB Statement No.34,a government entity will not continue to present fund statements.
A)True
B)False
Q4) The principal of fiduciary funds may be distributed.
A)True
B)False
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