Advanced Financial Accounting
Test Preparation
Course Introduction
Advanced Financial Accounting builds upon the foundational principles of accounting to explore complex topics in the preparation and analysis of financial statements. The course covers areas such as business combinations, consolidated financial statements, foreign currency transactions, segment and interim reporting, and accounting for partnerships, governmental, and not-for-profit organizations. Emphasis is placed on applying established accounting standards and regulations to real-world scenarios and developing problem-solving skills necessary for professional practice. Students will engage with in-depth case studies and practical assignments that reflect the challenges faced by accountants in multinational and diversified organizations.
Recommended Textbook
Financial Accounting 2nd Edition by J. David Spiceland
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15 Chapters
1948 Verified Questions
1948 Flashcards
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Page 2
Chapter 1: Accounting Information and Decision Making
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165 Verified Questions
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Sample Questions
Q1) Financial statements are periodic reports published by the company for the purpose of providing information to managers.
A)True
B)False
Answer: False
Q2) Transactions of a company that include the purchase and sale of long-term productive assets are referred to as:
A)Investing activities.
B)Financing activities.
C)Expenditure activities.
D)Operating activities.
Answer: A
Q3) Use the following appropriate amounts to calculate net income: Revenues,$12,000; Liabilities,$5,000; Expenses,$4,000; Assets,$19,000; Dividends,$4,000.
A)$6,000.
B)$8,000.
C)$4,000.
D)$14,000.
Answer: B
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Page 3
Chapter 2: The Accounting Information System
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171 Verified Questions
171 Flashcards
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Sample Questions
Q1) On January 1,Brad Inc.sold $30,000 in products to a customer on account.Then,on January 10,Brad collected the cash on that account.What is the impact on Brad's accounting equation from the collection of cash on January 10?
A)No net effect to the accounting equation.
B)Assets increase and liabilities decrease.
C)Assets decrease and liabilities decrease.
D)Assets increase and stockholders' equity increases.
Answer: A
Q2) A company pays $5,400 for maintenance in the current period.Record the transaction.
Answer: Repairs and Maintenance Expense \(\quad5,400 \) Cash\(\quad5,400 \)
Q3) Purchasing office supplies is recorded with a credit to office supplies. A)True
B)False
Answer: False
Q4) A credit to an account balance always results in the balance decreasing. A)True
B)False
Answer: False
Page 4
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Chapter 3: The Financial Reporting Process
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Sample Questions
Q1) At December 31,2012,a company has received,but not paid,a utility bill for $250.The amount of utility expense for the current period equals $250.
A)True
B)False
Answer: True
Q2) Accrued expenses involve the payment of cash before recording an expense and a liability.
A)True
B)False
Answer: False
Q3) A list of all accounts and their balances after updating account balances for adjusting entries is referred to as:
A)A trial balance.
B)An adjusted trial balance.
C)A post-closing trial balance.
D)An accounting trial balance.
Answer: B
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Page 5
Chapter 4: Cash and Internal Controls
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Sample Questions
Q1) Cash is typically reported as a current asset in the balance sheet.
A)True
B)False
Q2) Which of the following is NOT a design feature of effective internal controls?
A)Allow greater reliance by investors on reported financial statements.
B)Prevent fraudulent or errant financial reporting.
C)Ensure the company's price advantage over competitors.
D)Prevent misuse of company funds by employees.
Q3) Cash flows from investing activities do not include:
A)Borrowing.
B)The purchase of equipment.
C)The sale of land.
D)The purchase of a building.
Q4) Only transactions involving cash affect a company's cash flows.
A)True
B)False
Q5) Internal control is a company's plan to (1)improve the accuracy and reliability of accounting information and (2)safeguard the company's assets.
A)True
B)False
6
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Chapter 5: Receivables and Sales
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) The percentage-of-credit-sales method for estimating uncollectible accounts is commonly referred to as the income statement method,because it always results in a higher amount of net income being reported in the income statement.
A)True
B)False
Q2) Which of the following is recorded upon receipt of a payment on April 7,2012,by a customer who pays a $900 invoice dated March 3,2012,with terms 2/10,n/60?
A)Debit Sales Discounts $18.
B)Credit Purchase Discounts $18.
C)Credit Accounts Receivable $882.
D)Debit Cash $900.
Q3) Sales returns and allowances occur when the buyer returns the goods or the seller reduces the customer's balance owed.
A)True
B)False
Q4) Notes receivable typically arise from sales to customers.
A)True
B)False
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Chapter 6: Inventory and Cost of Goods Sold
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Sample Questions
Q1) A company uses a perpetual system to record inventory transactions.The company purchases inventory on account on February 9,2012,for $50,000 and then sells this inventory on account on March 7,2012,for $70,000.Record the transactions for the purchase and sale of the inventory.
Q2) Inventory is usually reported as a long-term asset in the balance sheet.
A)True
B)False
Q3) Inventory records for Dunbar Incorporated revealed the following: Dunbar sold 700 units of inventory during the month.Ending inventory assuming LIFO would be:
A)$500.
B)$490.
C)$470.
D)$480.Ending inventory = 200 x $2.40 = $480.
Q4) What is a multiple-step income statement? What information does it provide beyond "bottom-line" net income?
Q5) __________ is commonly referred to as the balance sheet approach.
Q6) Sales revenue minus cost of goods sold is referred to as operating income.
A)True
B)False
Page 8
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Chapter 7: Long-Term Assets
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Sample Questions
Q1) Which of the following subsequent expenditures would be capitalized?
A)Ordinary repair.
B)Costs that increase the service life of an asset.
C)Routine maintenance.
D)Both a and c.
Q2) We expense internally generated intangible assets,such as research and development and advertising costs,as we incur them.
A)True
B)False
Q3) During 2012 and 2013,Supplies,Inc.drove the truck 15,000 and 22,000 miles,respectively,to deliver merchandise to its customers.The company originally purchased the truck at the beginning of 2012 for $175,000.If the truck has an estimated life of 10 years and 300,000 miles,with an estimated residual value of $25,000,what amount of deprecation expense should Supplies,Inc.record in 2013 using the activity method?
A)$11,000.
B)$18,500.
C)$7,500.
D)$16,000.
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Page 9
Chapter 8: Current Liabilities
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Sample Questions
Q1) Long-term obligations such as notes,mortgages,and bonds are reported as long-term liabilities when they become payable within the upcoming year.
A)True
B)False
Q2) Strikers,Inc.sells soccer goals to customers over the Internet.History has shown that 2% of Strikers' goals are faulty and will need repair under the warranty program.For the year,Strikers has sold 4,000 goals and 45 have been repaired.If the estimated cost to repair a goal is $200,what would be the Warranty Liability at the end of the year?
A)$0.
B)$16,000.
C)$7,000.
D)$6,750.
Q3) Retailers like McDonalds,American Eagle,and Apple Computer sell a large number of gift cards.Explain how these companies account for the sale of gift cards.
Q4) All states impose a state income tax.
A)True
B)False
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Chapter 9: Long-Term Liabilities
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Sample Questions
Q1) Losses have the effect of reducing net income,while gains increase net income.
A)True
B)False
Q2) Presented below is a partial amortization schedule for Premium Foods: \(\begin{array}{ccccc}(1)&(2)&(3)&(4)&(5)\\ & \text { Cash } & \text { Interest } & \text { Decrease in } & \text { Carrying } \\ \text { Period }& \text { Paid }& \text { Expense }&\text { Carrying Value }& \text { Value }\\ \text { Issue date } & & & & 85,951 \\
1 & \$ 2,800 & \$ 2,579 & \$ 221 & 85,730 \\ 2 & 2,800 & 2,572 & 228 & 85,958 \end{array}\)
1.Record the bond issue.
2.Record the first interest payment.
Q3) A lease is a contractual arrangement by which the lessor provides the lessee the right to use an asset for a specified period of time.
A)True
B)False
Q4) 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) Corporations typically do not start raising capital by issuing stock to the general public.What are the common stages of equity financing leading to an initial public offering (IPO)?
Q2) Which of the following is a reason that a corporation would prefer to issue stock instead of bonds?
A)Dividend payments can be deducted for income tax purposes but interest payments cannot.
B)Expansion is accomplished without surrendering ownership control.
C)The risk of going bankrupt is less.
D)All of the above are reasons for issuing stock.
Q3) Which of the following statements about treasury stock transactions is true?
A)Treasury stock is recorded as an asset by the acquiring company.
B)Only losses on the sale of treasury stock are recorded on the income statement.
C)Stockholders' equity is reduced when treasury stock is purchased.
D)Both gains and losses on the sale of treasury stock are recorded on the income statement.
Q4) We record treasury stock at the cost of the shares reacquired.
A)True
B)False
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Chapter 11: Statement of Cash Flows
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Sample Questions
Q1) Data Solutions reports income tax expense of $1,700,000.Income taxes payable at the beginning and end of the year are $250,000 and $370,000,respectively.What is the amount of cash paid for income taxes?
A)$1,700,000.
B)$1,820,000.
C)$2,070,000.
D)$1,580,000.
Q2) Identify and briefly describe the three categories of cash flows reported in the statement of cash flows.
Q3) Transactions that don't increase or decrease cash,but that result in significant investing and financing activities,are reported either directly after the cash flow statement or in a separate note to the financial statements as noncash activities.
A)True
B)False
Q4) Income statement items that have no cash effect are still reported under the direct method.
A)True
B)False
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13
Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) Stealth Company's 2013 gross profit ratio is:
A)77.1%.
B)80.0%.
C)40.0%.
D)60.0%.
Q2) Popson Inc.incurred a material loss which was not unusual in character,but was clearly an infrequent occurrence.This loss should be reported as:
A)An extraordinary loss.
B)A loss from discontinued operations.
C)Other revenues and expenses.
D)A separate line item in retained earnings.
Q3) Which of the following items is most likely to be reported as an extraordinary loss?
A)Losses due to the write-down of inventory.
B)Losses on the sale of long-term assets.
C)Losses due to business restructuring.
D)Uninsured losses from a natural disaster.
Q4) The gross profit ratio is calculated as gross profit divided by net sales.
A)True
B)False
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Chapter 13: Time Value of Money
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Sample Questions
Q1) What is the value today of receiving $5,000 at the end of each year for the next 10 years,assuming an interest rate of 12% compounded annually?
A)$87,744.
B)$28,251.
C)$50,000.
D)$15,529.
Q2) Below are excerpts from interest tables for 8% interest.
\[\begin{array} { c c c c c } & \underline { 1 } & \underline { 2 } & \underline { 3 } & \underline { 4 } \\
1 & 1.0000 & 0.92593 & 1.08000 & 0.92593 \\
2 & 2.0800 & 0.85734 & 1.16640 & 1.78326 \\
3 & 3.2464 & 0.793833 & 1.25971 & 2.57710 \\
4 & 4.5061 & 0.73503 & 1.36049 & 3.31213
\end{array}\]
Column 4 is an interest table for the:
A)Future value of $1.
B)Present value of $1.
C)Future value of an annuity of $1.
D)Present value of an annuity of $1.
Q3) Explain the difference between present value and future value.
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Chapter 14: Investments
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Sample Questions
Q1) Bond investments are long-term assets that earn interest revenue,while bonds payable are long-term liabilities that incur interest expense.
A)True
B)False
Q2) Under what circumstances do we use the equity method to account for an investment in stock? Explain how we record dividends received from an investment in a company accounted for using the equity method.
Q3) When significant influence exists,the investment should be accounted for by the equity method.
A)True
B)False
Q4) Discuss the meaning of consolidated financial statements.When is it appropriate to consolidate financial statements of two companies?
Q5) Investments are reported at fair value when a company has an insignificant influence over another company in which it invests.
A)True
B)False
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Page 16
Chapter 15: International Financial Reporting Standards
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Sample Questions
Q1) Which inventory cost flow assumption is allowed under U.S.GAAP but not under IFRS? Explain why some U.S.companies will lobby strongly to keep this method as an allowable alternative.
Q2) In countries where debt financing is more common (Japan)compared to equity financing,there is greater emphasis on reporting the ability of the company to earn profits for its investors rather than the ability to repay debt.
A)True
B)False
Q3) Under IFRS,inventory write-downs due to using the lower-of-cost-or-market rule are allowed to be reversed in a future year if the market value subsequently increases.
A)True
B)False
Q4) In common law countries (such as the U.S.,the U.K.,and Canada),greater emphasis is placed on public information than in code law countries (such as France and Germany).
A)True
B)False
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