Financial Accounting
Exam Materials
Course Introduction
Financial Accounting is a foundational course that introduces students to the principles and practices essential for preparing and interpreting financial statements. The course covers key topics such as the accounting cycle, accruals and deferrals, asset and liability measurement, and the effects of transactions on financial statements. Students will learn to analyze and record business transactions, apply accounting standards, and utilize financial information to support decision-making by users such as investors, creditors, and management. Through practical exercises and case studies, students will develop skills in preparing balance sheets, income statements, and cash flow statements, fostering a comprehensive understanding of how organizations report financial performance and position.
Recommended Textbook
Survey of Accounting 5th Edition by Carl S. Warren
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15 Chapters
1711 Verified Questions
1711 Flashcards
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Page 2
Chapter 1: The Role of Accounting in Business
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94 Verified Questions
94 Flashcards
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Sample Questions
Q1) Name and describe the three forms of businesses and their advantages and disadvantages (if any).
Answer: 11ea8a6e_31e9_c152_96ef_b704583ed607_TB6232_00
Q2) Name the three different types of businesses that operate for profit and their respective characteristics.
Answer: 11ea8a6e_31e9_9a41_96ef_6594500b0c7f_TB6232_00
Q3) How do businesses make money? What strategies can they use to gain competitive advantage?
Answer: Businesses have the objective of making money by generating more revenues than costs.Businesses can seek competitive advantage by using a premium-price strategy or by using a low-cost strategy.A premium-price strategy tries to meet a unique market need based on quality,reliability,image,or design,allowing it to charge a higher price.A low-cost strategy focuses on efficiency in product design and production to offer a lower price due to lower costs.
Q4) Merchandising businesses produce products rather than provide services to customers.
A)True
B)False Answer: False
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Chapter 2: Basic Accounting Concepts
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88 Verified Questions
88 Flashcards
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Sample Questions
Q1) The gross increases in stockholders' equity attributable to business activities are called
A)assets.
B)liabilities.
C)revenues.
D)net income.
Answer: C
Q2) Miscellaneous expenses are expenses that have an undetermined amount to be paid.
A)True
B)False
Answer: False
Q3) The basic financial statements do NOT include the A)income statement.
B)tax return.
C)balance sheet.
D)statement of cash flows.
Answer: B
Q4) How can a company earn a large net income and have a small balance in retained earnings?
Answer: The company may pay out most of its earnings in dividends.
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Chapter 3: Accrual Accounting Concepts
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) River Corporation's accumulated depreciation increased by $12,000,while patents decreased by $3,500 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 loss on sale of land of $2,500.Accounts receivable increased $5,000,inventory decreased $3,200,prepaid expenses decreased $800,and account payable increased $2,000.Reconcile a net income of $55,000 to net cash flow from operating activities.
Answer: 11ea8a6e_31e2_954b_96ef_c32c4ff1f2f6_TB6232_00
Q2) A&M Co.purchased land for $50,000 with $10,000 paid in cash and $40,000 in a note payable due three years from now.What effect does this transaction have on the accounts under the accrual basis of accounting?
A)Net increase in assets of $40,000 and a net increase in liabilities of $40,000
B)Net increase in assets and liabilities of $50,000
C)Net increase in assets of $50,000 and a net decrease in liabilities of $40,000
D)Net increase in assets of $60,000 and a net decrease in liabilities of $40,000
Answer: A
Q3) Rights that are short-term in nature are called intangible assets.
A)True
B)False
Answer: False
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Chapter 4: Accounting for Merchandising Businesses
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) Merchandise inventory shrinkage will decrease Retained Earnings.
A)True
B)False
Q2) Which of the following businesses is a merchandising business?
A)H&R Block
B)Becker Law Office
C)Little Tykes Daycare
D)Kohl's
Q3) What is subtracted from sales to arrive at net sales?
A)Sales returns and allowances
B)Sales discounts
C)Both sales discounts and sales returns and allowances
D)Neither sales discounts nor sales returns and allowances
Q4) Net sales is equal to sales plus cost of merchandise sold.
A)True
B)False
Q5) A criticism of a single-step income statement is that net income is NOT available for analysis.
A)True
B)False
Page 6
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Chapter 5: Sarbanes-Oxley,internal Control,and Cash
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) A minimum cash balance maintained in a bank account is called a line of credit.
A)True
B)False
Q2) The internal control environment is enhanced by the hiring and retention of competent,honest employees.
A)True
B)False
Q3) A voucher is the notification accompanying the check issued to a creditor that indicates the specific invoice being paid.
A)True
B)False
Q4) Separating the responsibilities for purchasing,receiving,and paying for equipment is an example of the control procedure: separating operations,custody of assets,and accounting.
A)True
B)False
Q5) In a voucher system,paid vouchers are transferred to a paid voucher file.
A)True
B)False
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Chapter 6: Receivables and Inventories
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) Prepare the Current Assets section of a balance sheet using some or all of the following accounts:
Cash
Property,Plant,and Equipment
Accounts Receivable
Notes Receivable--90-day note
Merchandise Inventory
Allowance for Doubtful Accounts
Interest Receivable
Prepaid Advertising
Sales Returns and Allowances
Q2) Inventory costing methods place primary emphasis on assumptions about
A)flow of goods.
B)flow of costs.
C)flow of goods or costs depending on the method.
D)flow of values.
Q3) All receivables that are expected to be realized in cash within a year are presented in the current assets section of the balance sheet.
A)True
B)False
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Chapter 7: Fixed Assets and Intangible Assets
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) Which of the following is an example of a capital expenditure?
A)Cleaning the carpet in the front room
B)Tune-up for a company truck
C)Replacing an engine in a company car
D)Replacing all burned-out light bulbs in the factory
Q2) Which of the following is NOT characteristic of the accumulated depreciation account?
A)Accumulated depreciation represents cash reserved for asset replacement.
B)Accumulated depreciation is a contra-asset account.
C)Accumulated depreciation may be disclosed in the notes to the financial statements.
D)All of these are characteristic of the accumulated depreciation account.
Q3) The Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.
A)True
B)False
Q4) If a company sells a fixed asset where the book value is less than the cash received,a gain must be recognized.
A)True
B)False
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Chapter 8: Liabilities and Stockholders Equity
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132 Flashcards
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Sample Questions
Q1) When a corporation issues bonds,it executes a contract with the bondholders known as a bond debenture.
A)True
B)False
Q2) When the market rate of interest is less than the contract rate for a bond,the bond will sell for a discount.
A)True B)False
Q3) A 10% stock dividend will increase the number of shares outstanding and the book value per share.
A)True
B)False
Q4) Federal unemployment compensation taxes that are collected by the federal government are not paid directly to the unemployed but are allocated among the states for use in state programs.
A)True B)False
Q5) On April 1,10,000 shares of $20 par common stock were issued at $24.Illustrate the effects on the accounts and the financial statements.
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Chapter 9: Financial Statement Analysis
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83 Flashcards
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Sample Questions
Q1) The independent auditor's report does which of the following?
A)Describes which financial statements are covered by the audit
B)Gives the auditor's opinion regarding the fairness of the financial statements
C)Summarizes what the auditor did
D)States that the financial statements are truthful
Q2) The relationship of $225,000 to $100,000,expressed as a ratio,is
A)2.0 to 1.
B)1.8 to 1.
C)1.5 to 1.
D)2.25 to 1.
Q3) In computing the rate earned on total assets,interest expense is added to net income before dividing by average total assets.
A)True B)False
Q4) Solvency analysis focuses on the ability of a business to make a profit. A)True B)False
Q5) The rate earned on total assets is one of the measures of profitability. A)True
B)False
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Chapter 10: Accounting Systems for Manufacturing Businesses
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) Calculate cost of goods sold for Crawford,Inc.
A)$420,000
B)$370,000
C)$360,000
D)$276,500
Q2) Conversion cost is the combination of direct labor cost and factory overhead cost.
A)True
B)False
Q3) The current year's advertising costs are normally considered product costs.
A)True
B)False
Q4) Which of the following is FALSE in regards to direct materials for an auto manufacturer?
A)Steel would probably be a direct material.
B)Upholstery fabric would probably be a direct material.
C)Oil to lubricate factory machines would not be a direct material.
D)Small plastic clips to hold on door panels,because they become part of the auto,must be accounted for as direct materials.
Page 12
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Chapter 11: Cost Behavior and Cost-Volume-Profit Analysis
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139 Verified Questions
139 Flashcards
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Sample Questions
Q1) Total fixed costs remain constant as the level of activity changes.
A)True
B)False
Q2) For purposes of analysis,mixed costs are generally
A)classified as fixed costs.
B)classified as variable costs.
C)classified as period costs.
D)separated into their variable and fixed cost components.
Q3) Even if a business sells six products,it is possible to estimate the break-even point.
A)True
B)False
Q4) Which of the following conditions would cause the break-even point to decrease?
A)Total fixed costs increase
B)Unit selling price decreases
C)Unit variable cost decreases
D)Unit variable cost increases
Q5) A low operating leverage is normal for highly automated industries.
A)True
B)False
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Chapter 12: Differential Analysis and Product Pricing
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) Manufacturers must conform to the Robinson-Patman Act,which prohibits price discrimination within the United States unless differences in prices can be justified by different costs of serving different customers.
A)True
B)False
Q2) The amount of income that would result from an alternative use of cash is called
A)differential income.
B)sunk cost.
C)differential revenue.
D)opportunity cost.
Q3) When deciding to make or buy a part needed for the manufacturing process,management needs to consider whether the plant has excess production capacity available to make the part or if current production will need to be interrupted to manufacture the part.
A)True
B)False
Q4) The highest contribution margin per scarce resource is the most profitable.
A)True
B)False
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Chapter 13: Budgeting and Standard Cost Systems
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170 Flashcards
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Sample Questions
Q1) The variable factory overhead controllable variance is
A)$6,000 favorable.
B)$2,100 favorable.
C)$2,100 unfavorable.
D)$6,000 unfavorable.
Q2) The standard cost is how much a product should cost to manufacture.
A)True B)False
Q3) If the expected sales volume for the current period is 22,000 units,the desired ending inventory is 800 units,and the beginning inventory is 500 units,the number of units set forth in the production budget,representing total production for the current period,is
A)21,700.
B)21,500.
C)22,300.
D)22,800.
Q4) An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds actual cost.
A)True B)False
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Chapter 14: Performance Evaluation for Decentralized Operations
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) The balanced scorecard measures
A)only financial information.
B)only nonfinancial information.
C)both financial and nonfinancial information.
D)external and internal information.
Q2) How much would Division A's income from operations increase?
A)$0
B)$180,000
C)$60,000
D)$120,000
Q3) The major advantage of the rate of return on investment over income from operations as a divisional performance measure is that divisional investment is directly considered and thus comparability of divisions is facilitated.
A)True
B)False
Q4) The excess of divisional income from operations over a minimum amount of desired income from operations is termed the residual income. A)True
B)False
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Chapter 15: Capital Investment Analysis
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103 Flashcards
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Sample Questions
Q1) The computations involved in the net present value method of analyzing capital investment proposals are more involved than those for the average rate of return method.
A)True
B)False
Q2) The expected period of time that will elapse between the date of a capital investment and the complete recovery in cash of the amount invested is called the cash payback period.
A)True
B)False
Q3) The primary advantages of the average rate of return method are its ease of computation and the fact that
A)it emphasizes the amount of income earned over the life of the proposal.
B)there is less possibility of loss from changes in economic conditions and obsolescence when the commitment is short-term.
C)it is especially useful to managers whose primary concern is liquidity.
D)rankings of proposals are necessary.
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