Corporate Financial Reporting
Test Questions
Course Introduction
Corporate Financial Reporting is a comprehensive course that examines the principles, standards, and processes governing the preparation and presentation of financial statements for corporate entities. The course covers the regulatory and conceptual framework of financial reporting, including the application of International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). Students will learn how to analyze and interpret balance sheets, income statements, statements of cash flows, and shareholders equity, with a focus on the implications of financial reporting choices for decision-making by investors, creditors, and other stakeholders. Emphasis is placed on transparency, ethical considerations, and the role of financial reporting in corporate governance.
Recommended Textbook
Accounting 9th Canadian Edition Volumer II by Charles T. Horngren
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13 Chapters
2103 Verified Questions
2103 Flashcards
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Page 2
Chapter 12: Corporations: Paid-In Capital and the Balance Sheet
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167 Verified Questions
167 Flashcards
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Sample Questions
Q1) Ajax Company was founded in 2012. Its yearly earnings are shown here:
2012: Net income of $4,000
2013: Net income of $23,000
2014: Net income of $2,000
2015: Net loss of $30,000
No dividends were paid. At the end of the year 2015, what amount would be shown on the balance sheet for Retained earnings?
A) Negative $1,000
B) Positive $29,000
C) Positive $31,000
D) Negative $30,000
Q2) Hot Tamale Company had $120,000 of revenues and $125,000 of expenses. No dividends were paid. The third of the year-end closing entries should include which of the following line items?
A) Credit Retained earnings $5,000.
B) Debit Retained earnings $5,000.
C) Debit Income summary $5,000.
D) Credit Income summary $125,000.
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Page 3
Chapter 13: Corporations: Effects on Retained Earnings and the Income Statement
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Sample Questions
Q1) If Peartree resold 1,000 shares of treasury stock for $24 per share, which of the following statements would be TRUE?
A) The Treasury stock account would go down by $20,000.
B) The Paid-in capital account would not be affected.
C) The Treasury stock account would go up by $24,000.
D) The Paid-in capital account would go down by $4,000.
Q2) A corporation has net income of $365,000 for the current year. It paid its required preferred dividend of $17,500 and had no other stock transactions during the year. The average number of common shares outstanding during the year was 69,500. What is the earnings per share?
A) $5.84
B) $5.00
C) $4.37
D) $1.00
Q3) If a company's lenders wanted to ensure that the company maintained adequate levels of equity to pay back their loans, a good strategy would be to impose restrictions on dividend payments and purchases of treasury stock.
A)True
B)False
Page 4
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Chapter 14: The Statement of Cash Flows
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157 Flashcards
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Sample Questions
Q1) The change in accounts payable will be shown as a positive cash flow in the adjustments to Net income.
A)True
B)False
Q2) The first section presented on the statement of cash flows is the operating activities section.
A)True
B)False
Q3) The only part that differs in a statement of cash flows using the direct method from one using the indirect method is the:
A) financing activities section.
B) investing activities section.
C) operating activities section.
D) noncash investing and financing activities section.
Q4) How will dividend payments be shown on the statement of cash flows?
A) Positive $10,000 in the financing section
B) Negative $10,000 in the financing section
C) Positive $10,000 in the investing section
D) Negative $10,000 in the investing section
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) The dividend payout ratio indicates the amount of the dividend as a proportion of a share's market price.
A)True
B)False
Q2) Which of the following ratios is used to determine how quickly and easily a company is able to sell its inventory?
A) Current ratio
B) Inventory turnover
C) Price/earnings ratio
D) Return on net sales
Q3) If an analyst wishes to see how a company's net income as a percentage of net sales has changed from one year to the next, a vertical analysis would be the most appropriate approach.
A)True
B)False
Q4) Investors and creditors generally evaluate a company by using one year's data.
A)True
B)False
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Page 6
Chapter 16: Introduction to Management Accounting
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Sample Questions
Q1) For a manufacturing business, which of the following would be considered a direct labor cost?
A) Wages of the assembly line staff
B) Wages of the factory janitors
C) Wages of the factory manager
D) Wages of the internal auditors
Q2) Which of the following describes the term cost object?
A) An object which costs money to purchase
B) Any type of cost which is incurred to produce a finished product
C) Anything which requires a detailed record of its component costs to be kept
D) Any cost which is treated as a period expense
Q3) Which of the following statements about managerial accounting is CORRECT?
A) Managerial accounting reports are audited annually by Certified Public Accountants.
B) Managerial accounting reports help investors make decisions.
C) Managerial accounting reports provide detailed information on parts of a company.
D) Managerial accounting reports must follow Generally Accepted Accounting principles (GAAP).
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Chapter 17: Job Order and Process Costing
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Sample Questions
Q1) Please perform a process costing analysis and answer the following question: For the Refining Department in the month of January, what was cost per equivalent unit with respect to direct materials costs? (Please round to nearest cent.)
A) $1.40
B) $3.00
C) $1.34
D) $7.00
Q2) After these transactions have been recorded, the preliminary balance in the Manufacturing overhead account is a:
A) credit of $295,000.
B) credit of $5,000.
C) debit of $5,000.
D) debit of $13,000.
Q3) Which of the following companies would NOT use job order costing?
A) A lawn maintenance company
B) A legal firm
C) An auto repair shop
D) A beverage manufacturer
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8
Chapter 18: Activity-Based Costing and Other Cost Management Tools
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160 Flashcards
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Sample Questions
Q1) An activity-based costing system would be of less value to a business making a single product than it would be for a company with multiple products.
A)True B)False
Q2) Target pricing is based on the cost to produce a product, plus a profit mark-up.
A)True
B)False
Q3) Percival Company wishes to sell wooden beams to home builders. The current market price of the beams is $950, and Percival knows it must accept the market price. Currently, the beams cost Percival $809 to produce. The company wishes to make a profit equal to 16% of the price. Which of the following strategies would help Percival accomplish their objective?
A) Increase the production cost by $22 per unit.
B) Increase the volume of sales.
C) Increase the sales price to $961.
D) Reduce production costs by $11 per unit.
Q4) Costs spent to avoid poor quality goods are considered internal failure costs.
A)True
B)False
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Chapter 19: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Using absorption costing, what is the cost per unit produced?
A) $16.25
B) $14.25
C) $14.50
D) $12.75
Q2) Axelrod Company has fixed costs of $250,000. Highest production volume this year was in January when there were 100,000 units produced and total costs of $550,000. In June, the company produced only 60,000 units. How much was the total cost in June?
A) $378,000
B) $430,000
C) $330,000
D) $414,500
Q3) Porterhouse Company has both fixed and variable production costs. If volume goes up by 20%, how would that affect the total fixed costs? (Assume all volumes are within the relevant range.)
A) Would go up 20%
B) Would remain the same
C) Would go up by some amount less than 20%
D) Would go down
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Page 10
Chapter 20: Short-Term Business Decisions
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Sample Questions
Q1) RS Company's management is considering dropping the western territory and has determined that 90% of the fixed expenses are avoidable. What is the change in RS Company's forecasted operating income for the upcoming year if the western territory is dropped?
A) Up $26,400
B) Up $1,640
C) Down $330,000
D) Up $66,000
Q2) Able Specialty Foods sells jars of special spices used in Spanish cooking. The variable cost is $0.90 per unit. Fixed costs are $8,400,000 per year. Able has $20,000,000 of assets, and investors expect a return of 10% on their assets. Able sells 4,000,000 units per year. Because they are the only company which produces this kind of product, they use cost-plus pricing. Using cost-plus methodology, how much should the price per unit be? (Please round to the nearest cent.)
A) $3.00
B) $3.50
C) $3.16
D) $3.24
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11
Chapter 21: Capital Investment Decisions and the Time
Value of Money
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152 Flashcards
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Sample Questions
Q1) Cash flows used in NPV and IRR analyses include all of the following EXCEPT:
A) future increased sales.
B) future cost savings.
C) depreciation expense.
D) residual value.
Q2) Which of the following best describes the internal rate of return?
A) The discount rate that makes the cost of the investment equal to the present value of the cash flows
B) The discount rate that is used to borrow funds from a lender
C) The ratio of average annual income to average amount invested
D) The rate at which an investment pays back
Q3) When comparing several investments with the same initial outlay, the decision should be made on the basis of which of the following?
A) Which project has the most total cash flows
B) Which project has the shortest payback
C) Which project has the highest NPV
D) Which project is completed first
Q4) The payback method uses discounted cash flows to make investment decisions. A)True B)False
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Chapter 22: The Master Budget and Responsibility Accounting
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Sample Questions
Q1) What are the total cash payments made in October for purchases?
A) $77,680
B) $79,480
C) $69,330
D) $74,290
Q2) There are five types of responsibility centers cost centers, revenue centers, profit centers, investment centers, and financial centers.
A)True
B)False
Q3) Based on the above data, what is the projected cash balance at the end of June?
A) $22,000
B) $21,900
C) $23,700
D) $22,400
Q4) How much is the operating net income/(loss) for March?
A) $3,500
B) $1,450
C) ($500)
D) $7,500
Page 13
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Chapter 23: Flexible Budgets and Standard Costs
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Sample Questions
Q1) The flexible budget variance arises because the number of units actually sold differs from the static budget units.
A)True
B)False
Q2) Based on the above data, how much was the flexible budget variance for sales revenue?
A) $5,490 U
B) $5,490 F
C) $3,960 U
D) $3,960 F
Q3) A static budget is prepared for one level of sales volume.
A)True
B)False
Q4) Based on the above data, which of the following statements would be a correct interpretation of the sales volume variance for operating income?
A) Decrease in price per unit
B) Increase in variable cost per unit
C) Increase in sales volume
D) Increase in fixed costs
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Chapter 24: Performance Evaluation and the Balanced Scorecard
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Sample Questions
Q1) Which one of the following is NOT a goal of a performance evaluation system?
A) Communicating expectations
B) Formulating a budget
C) Motivating unit managers
D) Providing feedback
Q2) Companies benchmark their performance against the performance of their competitors and also against their own past performance.
A)True
B)False
Q3) Which of the following KPIs are used to evaluate how efficiently a business unit uses assets?
A) Hours of employee training
B) Defect rate
C) New product development time
D) Economic value added
Q4) Decentralization increases the difficulty of achieving goal congruence among managers.
A)True
B)False
Page 15
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