Business Accounting
Final Test Solutions
Course Introduction
Business Accounting is an essential course that introduces students to the fundamental principles and practices of accounting within a business context. It covers key topics such as the accounting cycle, preparation and analysis of financial statements, bookkeeping, and the role of accounting in decision-making. Students will learn how to interpret financial data, manage budgets, and understand the ethical considerations in accounting. This course provides practical skills for tracking and reporting business transactions, equipping students with the foundational knowledge needed for further study in accounting or for effective financial management in a business environment.
Recommended Textbook
Financial Accounting An Introduction to Concepts Methods and Uses 14th Edition by Roman L. Weil
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17 Chapters
2499 Verified Questions
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Chapter 1: Introduction to Business Activities and Overview
of Financial Statements and the Reporting Process
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) The balance sheet of Copper Industries, a producer of copper, showed retained earnings of $26,000 million at March 31, 20x1.At March 31, 20x2, the balance in retained earnings was $70,500 million .Copper declared dividends during the year ended March 31, 20x2, of $3,500 million.Compute Copper's net income for the year ended March 31, 20x2 (fiscal 20x1).
A)$41.000 million
B)$44.500 million
C)$48.000 million
D)$53.500 million
E)$58.000 million
Answer: C
Q2) To increase cash flow, a manufacturer might:
A)delay paying its suppliers.
B)borrow from a bank using the inventory as collateral.
C)institute a just-in-time inventory system.
D)all of the above
E)none of the above
Answer: D
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Chapter 2: The Basics of Record Keeping and Financial
Statement Preparation: Balance Sheet
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Sample Questions
Q1) The balance sheet begins with a list of assets and then lists liabilities and shareholders' equity.
A)True
B)False
Answer: True
Q2) What distinguishes noncurrent assets from current assets?
Answer: The distinction is based on time.Current assets are expected to be converted to cash or used within a year.Noncurrent assets are expected to be converted to cash over longer periods.
Q3) Current assets are expected to be converted to cash within A)a week.
B)a month.
C)a quarter.
D)a year.
E)two years.
Answer: D
Q4) The date of the balance sheet appears at the bottom of the balance sheet. A)True
B)False Answer: False
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Chapter 3: The Basics of Record Keeping and Financial
Statement Preparation: Income Statement
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Common terminology, but not definitions in U.S.GAAP and IFRS, often refers to the difference between sales and cost of sales as gross
A)margin.
B)revenues.
C)expenses.
D)all of the above.
E)none of the above.
Answer: A
Q2) Items classified as operating expenses reflect management's judgment that the item is a cost of the core business.
A)True
B)False
Answer: True
Q3) Expenses measure the outflow of net assets consumed in the process of generating revenues.
A)True
B)False
Answer: True
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Chapter 4: Balance Sheet: Presenting and Analyzing
Resources and Financing
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Sample Questions
Q1) Retained earnings are
A)a source of financing for assets.
B)cash.
C)other non-cash assets.
D)the sum of a firm's dividend declarations.
E)the source of net assets generated by the earnings process.
Q2) A cereal company issues coupons that can be exchanged for boxes of cereal.It issues two million coupons that promise the retailer who redeems the coupons $1 per coupon.The probability of redemption of any one coupon is 10%. What is the amount of the liability that the company recognizes?
A)$2,000
B)$20,000
C)$100,000
D)$200,000
E)$2,000,000
Q3) One can analyze the financial health of a business from a single financial statement considered in isolation such as the balance sheet.
A)True
B)False
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Chapter 5: Income Statement: Reporting Results of Operating Activities
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) What is comprehensive income?
Q2) How are expenses recognized and measured?
Q3) Gains/Losses arise from relatively infrequent transactions, and there can be no assurance that they will recur in any future period.
A)True
B)False
Q4) Which of the following is/are true?
A)Revenues measure the inflow of net assets from operating activities.
B)Expenses measure the outflow of net assets consumed in the process of generating revenues.
C)Recognizing revenues and expenses always involves a simultaneous entry in an asset and/or liability account.
D)Adjusting entries almost always involve an entry in at least one income statement and one balance sheet account.
E)All of the above are true.
Q5) Revenues measure the inflow of net assets from operating activities.
A)True
B)False
Q6) What are the criteria for revenue recognition?
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Chapter 6: Statement of Cash Flows
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140 Flashcards
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Sample Questions
Q1) Under U.S.GAAP, the statement of cash flows classifies cash expenditures for interest expense as a(n) _____ activity and classifies cash expenditures to redeem debt as a(n) _____ activity.
A)financing; financing
B)financing: operating
C)operating; investing
D)operating; operating
E)operating; financing
Q2) Some analysts focus attention on cash flow from operations, thinking it as important as, or more important than, net income as a performance measure.
A)True
B)False
Q3) The disposal of equipment for an amount of cash greater than the carrying value of the equipment results in a cash receipt equal to the carrying value of the equipment plus the gain on the disposal, which appears in net income.
A)True
B)False
Q4) Describe the various sections of the statement of cash flows.
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8
Chapter 7: Introduction to Financial Statement Analysis
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Sample Questions
Q1) Measures for assessing short-term liquidity risk include all of the following except:
A)current ratio.
B)quick ratio.
C)cash flow from operations to current liabilities ratio.
D)working capital turnover ratios.
E)price earnings ratio.
Q2) The value of common stock investments will likely change between the time the shares are purchased and the time in the future when they are sold.The difference between the eventual selling price and the purchase price, is often called
A)speculative returns.
B)enrichment.
C)inflation.
D)price appreciation (or price depreciation, if negative).
E)deflation.
Q3) Explain how common-size balance sheets are used by analysts.
Q4) Discuss any ethical issues raised by the following actions.
Q5) What are the limitations of ratio analysis?
Q6) What are pro forma financial statements?
Q7) Describe the fixed asset turnover ratio.
Page 9
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Chapter 8: Revenue Recognition, Receivables, and
Advances From Customers
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138 Verified Questions
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Sample Questions
Q1) Conceptual guidance in U.S.GAAP refers to the selling entity having earned the revenues (that is, having completed the earnings process).IFRS refers to
A)transferring the risks and rewards of ownership to customers (in the case of revenues involving goods).
B)having rendered services (in the case of revenues involving services).
C)measuring the costs of any obligations that the seller has not performed at the time it recognizes revenue with reasonable reliability.
D)all of the above.
E)none of the above.
Q2) Firms that reduce the price charged to a customerafter the firm has delivered the goods and the customer has found them to be unsatisfactory or damaged issue a sales allowance.
A)True
B)False
Q3) Describe the accounts receivable recognition process.
Q4) How do sellers measure revenue?
Q5) Discuss the application of the allowance method for sales returns.
Page 10
Q6) Briefly explain the difference between a sales allowance and a sales discount.
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Chapter 9: Working Capital
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Sample Questions
Q1) The lower-of-cost-or-market basis results in reporting
A)unrealized holding losses on inventory items currently through lower net income amounts.
B)delays reporting unrealized holding gains until the firm sells the goods.
C)unrealized holding gains on inventory items currently through higher net income amounts.
D)a and b
E)none of the above
Q2) Discuss inventory accounting concepts and issues.
Q3) Which inventory cost flow assumption emphasizes the balance sheet as opposed to the income statement?
A)LIFO method
B)FIFO method
C)weighted-average method
D)acquisition cost
E)specific identification method
Q4) As time passes, firms gain information about both actual warranty usage and actual warranty expenditures.
A)True
B)False
Page 11
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Chapter 10: Long-Lived Tangible and Intangible Assets
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Sample Questions
Q1) Firms must expense when incurred the transactions cost of acquiring a firm in a business combination under both U.S.GAAP and IFRS.
A)True
B)False
Q2) Which of the following is true regarding asset abandonment?
A)Firms will sometimes abandon assets if there is no market for the asset.
B)The firm eliminates the carrying value of the asset and recognizes a loss in an amount equal to the carrying value.
C)Firms will sometimes abandon assets if an automobile is severely damaged in an accident.
D)Firms will sometimes abandon assets if a machine requires an overhaul that is not cost effective.
E)all of the above
Q3) How does disposal of an asset through sale, abandonment, or trade-in on another asset affect net income?
Q4) How do firms account for expenditures to maintain or improve long-lived assets?
Q5) What happens when the original depreciation or amortization schedule for long-lived assets requires changing?
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Chapter 11: Notes, Bonds, and Leases
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Sample Questions
Q1) On January 1, Year 1, Fox Co., Inc., issues $100,000 par value, 10% bonds maturing in 10 years to yield 12% per year, compounded semiannually on January 1 and July 1.Use the present value tables.
Refer to the Fox Co., Inc.example.How much are the initial issue proceeds to the nearest amount shown?
A)$32,197
B)$88,530
C)$100,000
D)$112,462
E)$102,462
Q2) Which of the following is/are not one of the conditions of a capital lease?
A)transfer of ownership to the lessee at the end of the lease term
B)transfer of ownership to the lessee appears likely because of a "bargain" purchase option
C)lease extends for at least 70 percent of the asset's life
D)present value of the minimum contractual lease payments equals or exceeds 90 percent of the fair market value of the asset at the time the lessee signs the lease
E)all of the above
Q3) How does a lessor account for leases?
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Page 13
Chapter 12: Liabilities: Off-Balance Sheet Financing, Retirement
Benefits, and Income Taxes
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Sample Questions
Q1) Many off-balance-sheet financings fall into one of two categories that accounting typically does not recognize as liabilities: executory contracts and contingent obligations.
A)True
B)False
Q2) Downy Airlines discloses the funded status of pension plans and the health and life insurance plans for two recent years.Both the pension plan and other benefit plans are underfunded.The underfunded amounts for these plans appear in A)current assets and noncurrent assets on the balance sheet.
B)current liabilities and noncurrent liabilities on the balance sheet.
C)shareholders' equity on the balance sheet.
D)revenue on the income statement.
E)expenses on the income statement.
Q3) The accounting for transfers of receivables has come under the scrutiny of standard setters, as has the accounting for transfers involving inventories and research and development
A)True
B)False
Q4) Discuss the interpretation of retirement benefit disclosures.
Page 14
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Chapter 13: Marketable Securities and Derivatives
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Sample Questions
Q1) Lightner Company decides that an available-for-sale security is impaired as of December 31, 2013 and has an unrealized loss of $5,000.The journal entry to record an impairment loss on securities available-for-sale would be:
A)Unrealized Holding Loss on Securities Available-for-Sale...........5,000 Impairment Loss..............5,000
B)Impairment Loss................ 5,000
Unrealized Holding Loss on Securities Available-for-Sale.................... 5,000
C)Realized Holding Loss on Securities Available-for-Sale..........5,000 Impairment Loss............. 5,000
D)Impairment Loss ............ 5,000
Realized Holding Loss on Securities Available-for-Sale..............5,000
E)Impairment Loss................... 5,000
Retained Earnings................ 5,00
Q2) Discuss the accounting for debt securities held to maturity and arguments against this approach.
Q3) How are hedging gains and losses treated?
Q4) How are securities measured at acquisition?
Q5) What is the accounting treatment for securities available for sale?
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Chapter 14: Intercorporate Investments in Common Stock
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Sample Questions
Q1) Describe the accounting for minority, active investments.
Q2) An intercompany transaction is a transaction between
A)two subsidiary corporations only.
B)the subsidiaries and the parent company only.
C)any two members of a consolidated entity.
D)any two members of a consolidated entity, conducted at arm's-length.
E)any three members of a consolidated entity.
Q3) Accountants sometimes refer to the equity method as a one-line consolidation because
A)the revenues less the expenses of the subsidiary appear in the one account, Equity in Earnings of Subsidiary.
B)the assets and liabilities of the subsidiary appear on one line, Investment in Subsidiary.
C)the application of the equity method therefore rests on the guiding principle to treat the items in such a way that the parent's net income equals the same amount that it would report if it consolidated the investee firm instead of using the equity method.
D)all of the above
E)none of the above
Q4) Describe the U.S.GAAP requirement in accounting for joint venture investments.,
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Page 16
Chapter 15: Shareholders Equity: Capital Contributions and Distributions
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Sample Questions
Q1) Which of the following is not true?
A)All corporations must issue common stock.
B)Common shareholders have a claim on the assets of a firm after creditors and preferred shareholders have received amounts promised to them.
C)Frequently, corporations grant voting rights only to common shares, giving their holders the right to elect members of the board of directors and to decide certain broad corporate policies (spelled out in the stock contract).
D)Some firms issue more than one class of common shares, with each class granted different voting rights.
E)Firms generally issue preferred shares, both at the time of initial incorporation and in subsequent years, for amounts greater than par (or stated) value.
Q2) U.S.GAAP and IFRS do not require the firm to measure the fair value of the stock warrants separately from the value of the associated bond or preferred stock and allocate the issue price between the two securities.
A)True
B)False
Q3) Discuss callable preferred shares from the issuer's point-of-view.
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Page 17
Chapter 16: Statement of Cash Flows: Another Look
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Sample Questions
Q1) For each of the following transactions, determine what adjustment is necessary to prepare the statement of cash flows using the indirect method.
a. Firm A sells equipment with a cost of $1,000 and accumulated depreciation of $800 for $400 cash.
b. Firm A uses the equity method to record its investment in Firm B. In the current year, A records $1,000 as equity in earnings of affiliate. No dividends are paid by B.
c. Firm A acquires a building through a capital lease transaction. The building and lease were recorded at $100,000. Firm A chooses to report this transaction in the statement of cash flows.
Q2) Cash flow from investing activities does not include
A)cash purchases of property, plant, and equipment.
B)cash sales of marketable securities and investments in securities.
C)cash sales of property, plant, and equipment.
D)cash sales of intangibles.
E)cash purchases of treasury stock.
Q3) Describe the effects of transactions involving investments on the statement of cash flows.
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Page 18
Chapter 17: Synthesis and Extensions
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Sample Questions
Q1) Describe comprehensive income, net income, and other comprehensive income.
Q2) The joint efforts of the FASB and the IASB to set forth qualitative characteristics of financial reporting information have led to which of the following?
A)fundamental qualitative characteristics, only
B)enhancing qualitative characteristics, only
C)pervasive constraints, only
D)fundamental qualitative characteristics, enhancing qualitative characteristics, and pervasive constraints
E)none of the above
Q3) Discuss GAAP reporting of income transactions.
Q4) Firms often acquire derivative instruments to hedge interest rate, exchange rate, commodity price, and other risks.
A)True
B)False
Q5) When do firms recognize revenue?
Q6) Explain the accounting for redeemable preferred shares.
Q7) Explain the accounting for retirement benefits.
Q8) How do firms account for intangibles other than goodwill?
Q9) Explain the accounting for marketable securities.
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