Corporate Accounting
Study Guide Questions
Course Introduction
Corporate Accounting provides a comprehensive understanding of the financial accounting concepts, principles, and practices relevant to corporations. The course covers essential topics such as the preparation and analysis of financial statements, accounting for share capital and debentures, corporate governance, amalgamation, absorption, reconstruction, and liquidation of companies. Students will also explore regulatory frameworks, compliance requirements, and the interpretation of corporate reports. Through theoretical knowledge and practical exercises, learners gain the skills necessary to handle complex corporate financial transactions, make informed decisions, and ensure transparency and accountability in corporate financial reporting.
Recommended Textbook
Corporate Financial Accounting 13th Edition by Carl Warren
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Page 2
Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) Which of the following is not true of accounting principles?
A)Financial accountants follow generally accepted accounting principles GAAP.
B)Following GAAP allows accounting information users to compare one company to another.
C)A new accounting principle can be adopted with stockholders' approval.
D)The Financial Accounting Standards Board FASB has primary responsibility for developing accounting principles.
Answer: C
Q2) Which of the following is not a business transaction?
A)Erin,the CEO,buys $15,000 in stock in a bank account in the name of Bob's Lawn Service.
B)Erin provided services to customers earning fees of $600.
C)Erin purchased hedge trimmers for Bob's Lawn service agreeing to pay the supplier next month.
D)Erin pays her monthly personal credit card bill.
Answer: D
Q3) Give the major disadvantage of disregarding the cost concept and constantly revaluing assets based on appraisals and opinions.
Answer: Accounting reports would become unstable and unreliable.
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Chapter 2: Analyzing Transactions
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Sample Questions
Q1) In which of the following types of accounts are decreases recorded by credits?
A)liabilities
B)stockholders' equity
C)assets
D)revenues
Answer: C
Q2) A debit balance in which of the following accounts would indicate a likely error?
A)Salaries Expense
B)Notes Payable
C)Common Stock
D)Supplies
Answer: B
Q3) Liabilities are debts owed by the business entity.
A)True
B)False
Answer: True
Q4) Prepare a journal entry for the purchase of a truck on April 4 for $85,700 , paying $15,000 cash and the remainder on account.Omit explanation.
Answer: 11ed70a3_1094_7bd6_8264_d36778a98ca4_TB6236_11
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) A company realizes that the last two days' revenue for the month was billed but not recorded.The adjusting entry on December 31 is a debit to Accounts Receivable and a credit to Fees Earned.
A)True
B)False Answer: True
Q2) A company depreciates its equipment $500 a year.The adjusting entry on December 31 is a debit to Depreciation Expense,$500,and a credit to Equipment,$500.
A)True
B)False Answer: False
Q3) Record journal entries for the following transactions.
a. On December 1,$18,000 was received for a service contract to be performed from December 1 through April 30.
b. Assuming the work is performed evenly throughout the contract period,prepare the adjusting journal entry on December 31.
Answer: 11ed70a8_8887_532c_8264_4b9f6bceaa69_TB6236_11
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Page 5
Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Determine the current assets.
A)$23,030
B)$10,330
C)$21,930
D)$8,630
Q2) Which of the statements below indicates that a company earned a net income for the period?
A)The sum of the credits exceeds the sum of the debits in the Balance Sheet columns on the end-of-period spreadsheet.
B)The sum of the credits exceeds the sum of the debits in the Income Statement columns on the end-of-period spreadsheet.
C)The sum of the debits exceeds the sum of the credits in the Income Statement columns on the end-of-period spreadsheet.
D)Cash inflows exceed cash outflows.
Q3) Land is an example of a plant asset.
A)True
B)False
Q4) List and describe the purpose of the four closing entries.
Q5) Describe a classified balance sheet.
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Chapter 5: Accounting for Merchandising Businesses
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Sample Questions
Q1) On March 5,Blowout Sales makes $22,500 in sales on the company's own credit cards.The cost of merchandise sold is $16,825.Journalize the sales and recognition of the cost of merchandise sold.
Q2) A sales invoice included the following information: merchandise price,$12,000; terms 1/10,n/eom; FOB shipping point with prepaid freight of $900 added to the invoice.Assuming that a credit for merchandise returned of $500 is granted prior to payment and that the invoice is paid within the discount period,what is the amount of cash that should be received by the seller?
A)$12,285
B)$11,500
C)$10,480
D)$11,385
Q3) Merchandise with an invoice price of $6,000 is purchased on September 2 subject to terms of 2/10,n/30,FOB destination.Freight costs paid by the seller totaled $200.What is the required payment if paid on September 12?
A)$6,120
B)$5,940
C)$6,090
D)$5,880
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Page 7
Chapter 6: Inventories
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Sample Questions
Q1) A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are not in the possession of the consignor.
A)True
B)False
Q2) Cost flow is in the order in which costs were incurred when using A)average cost
B)last-in,first-out
C)first-in,first-out
D)weighted average
Q3) Stevens Company started the year with an inventory cost of $145,000.During the month of January,Stevens purchased inventory that cost $53,000.January sales totaled $140,000.Estimated gross profit is 35%.The estimated ending inventory as of January 31 is
A)$58,000
B)$91,000
C)$107,000
D)$69,300
Q4) Describe three inventory cost flow assumptions and how they impact the financial statements.
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8
Chapter 7: Sarbanes-Oxley,internal Control,and Cash
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Sample Questions
Q1) If an adjustment for an NSF check is made in a company's bank reconciliation,then the company must have written a bad check during the month.
A)True
B)False
Q2) If the balance in Cash Short and Over at the end of a period is a credit,it indicates that cash shortages have exceeded cash overages for the period.
A)True
B)False
Q3) Green Valley Bank sent Comstock Industries its end-of-month bank statement for July.The end of month balance by the bank is $11,237.The statement shows that a deposit for $4,250 is in transit at the end of the statement period.The statement also revealed that checks for $87,$105,and $95 are outstanding.Green Valley collected a $4,000 note receivable plus $240 of interest revenue.The bank charges $20 for the collection service.The bank charges a monthly account fee of $35.The end-of-month balance per company books is $11,135.
Prepare a bank/account reconciliation and write any necessary journal entries for the reconciliation.
Q4) Why would a bank require a company to maintain a compensating balance?
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Page 9
Chapter 8: Receivables
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Sample Questions
Q1) The party promising to pay a note at maturity is the maker.
A)True
B)False
Q2) Receivables that are expected to be collected in cash in eighteen months or less are reported in the current asset section of the balance sheet.
A)True
B)False
Q3) The direct write-off method of accounting for uncollectible accounts
A)emphasizes balance sheet relationships
B)is often used by small companies and companies with few receivables
C)emphasizes cash realizable value
D)emphasizes the matching of expenses with revenues
Q4) Discount Mart utilizes the allowance method of accounting for uncollectible receivables.On December 12 the company receives a $550 check from Chad Thomas in settlement of Thomas's $1,100 outstanding accounts receivable.Due to Thomas's failing health he is closing his company and is expecting to make no further payments to Discount Mart.Journalize this declaration.
Q5) List at least three indicators that a receivable may be uncollectible.
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Page 10
Chapter 9: Fixed Assets and Intangible Assets
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Sample Questions
Q1) When exchanging equipment,if the trade-in allowance is greater than the book value a loss results.
A)True
B)False
Q2) When land is purchased to construct a new building,the cost of removing any structures on the land should be charged to the building account.
A)True
B)False
Q3) The Weber Company purchased a mining site for $1,750,000 on July 1.The company expects to mine ore for the next 10 years and anticipates that a total of 400,000 tons will be recovered.The estimated residual value of the property is $150,000.During the first year,the company extracted 6,500 tons of ore.The depletion expense is
A)$15,000
B)$16,000
C)$17,500
D)$26,000
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11
Chapter 10: Current Liabilities and Payroll
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Sample Questions
Q1) The amount borrowed is equal to the face amount of the note on an interest bearing note payable.
A)True
B)False
Q2) During September,Excom sold 100 radios for $50 each and provided a two-year warranty with each unit.Each radio cost Excom $30 to produce.If 5% of the goods sold typically need to be replaced over the warranty period and one is actually replaced during September,for what amount in September would Excom debit Product Warranty Expense?
A)$50
B)$150
C)$30
D)$120
Q3) The journal entry a company uses to record accrued vacation privileges for its employees at the end of the year is
A)debit Vacation Pay Expense; credit Vacation Pay Payable
B)debit Vacation Pay Payable; credit Vacation Pay Expense
C)debit Salary Expense; credit Cash
D)debit Salary Expense; credit Salaries Payable
Q4) List five internal controls that relate directly to payroll.
Page 12
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Chapter 11: Corporations: Organization,stock
Transactions,and Dividends
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Sample Questions
Q1) The Dayton Corporation began the current year with a retained earnings balance of $32,000.During the year,the company corrected an error made in the prior year,which was a failure to record depreciation expense of $3,000 on equipment.Also,during the current year,the company earned net income of $12,000 and declared cash dividends of $7,000.Compute the year-end retained earnings balance.
A)$34,000
B)$37,000
C)$41,000
D)$44,000
Q2) The primary purpose of a stock split is to
A)increase paid-in capital
B)reduce the market price of the stock per share
C)increase the market price of the stock per share
D)increase retained earnings
Q3) The amount of a corporation's retained earnings that has been restricted/appropriated should be reported in the notes to the financial statements.
A)True
B)False
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Chapter 12: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) A $500,000 bond issue on which there is an unamortized discount of $35,000 is redeemed for $475,000.Journalize the redemption of the bonds.
Q2) The balance in Premium on Bonds Payable
A)should be reported on the balance sheet as a deduction from the related bonds payable
B)should be allocated to the remaining periods for the life of the bonds by the straight-line method,if the results obtained by that method materially differ from the results that would be obtained by the effective interest rate method
C)would be added to the related bonds payable on the balance sheet
D)should be reported in the paid-in capital section of the balance sheet
Q3) When the market rate of interest was 12%,Halprin Corporation issued $1,000,000,11%,10-year bonds that pay interest annually.The selling price of this bond issue was
A)$321,970
B)$1,000,000
C)$943,494
D)$621,524
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Chapter 13: Investments and Fair Value Accounting
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Sample
Questions
Q1) The financial statements resulting from combining parent and subsidiary statements are called consolidated statements.
A)True
B)False
Q2) Cash is used for all of the following activities except
A)supporting current operating activities
B)replacing worn-out machinery
C)expanding current operations
D)bribing government officials
Q3) Interest revenue on bonds is reported
A)as an addition to the Investment in Bonds account
B)as part of comprehensive income but not as part of net income
C)as part of other income
D)as part of operating income
Q4) The equity method is usually more appropriate for accounting for investments where the purchaser does not have significant influence over the investee.
A)True
B)False
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Page 15
Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) Durrand Corporation's accumulated depreciation increased by $12,000,while patents decreased by $2,200 between consecutive balance sheet dates.There were no purchases or sales of depreciable or intangible assets during the year.In addition,the income statement showed a gain of $4,300 from sale of land.Reconcile a net income of $65,000 to net cash flow from operating activities.
Q2) A company purchases equipment for $32,000 cash.This transaction should be shown on the statement of cash flows under
A)investing activities
B)financing activities
C)noncash investing and financing activities
D)operating activities
Q3) Preferred stock issued in exchange for land would be reported in the statement of cash flows in
A)the cash flows from financing activities section
B)the cash flows from investing activities section
C)a separate schedule
D)the cash flows from operating activities section
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16
Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) Assuming that the quantities of inventory on hand during the current year were sufficient to meet all demands for sales,a decrease in the inventory turnover for the current year when compared with the turnover for the preceding year indicates an improvement in inventory management.
A)True
B)False
Q2) A common measure of liquidity is
A)the ratio of sales to assets
B)dividends per share of common stock
C)the accounts receivable turnover
D)the profit margin
Q3) The effects of differences in accounting methods are of little importance when analyzing comparable data from competing businesses.
A)True
B)False
Q4) The denominator of the rate of return on total assets ratio is the average total assets.
A)True
B)False
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