Financial Accounting
Exam Materials
Course Introduction
Financial Accounting introduces students to the fundamental principles and practices of financial statement preparation and analysis. The course covers key concepts such as the accounting cycle, recording and posting transactions, and the preparation of essential financial reports including the balance sheet, income statement, and cash flow statement. Emphasis is placed on understanding Generally Accepted Accounting Principles (GAAP), the role of accounting information in business decision-making, and the ethical considerations in financial reporting. Through practical examples and exercises, students will develop the foundational skills necessary to interpret and communicate financial information in a business context.
Recommended Textbook
Using Financial Accounting Information The Alternative to Debits and Credits 10th Edition by Gary
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14 Chapters
2617 Verified Questions
2617 Flashcards
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Chapter 1: Accounting As a Form of Communication
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196 Verified Questions
196 Flashcards
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Sample Questions
Q1) The concept that assumes that assets are recorded at the amount to acquire them is called the _________________________.
Answer: cost principle
Q2) The primary objective of external auditors is to provide assurance to stockholders and other users that the statements are fairly presented.
A)True
B)False
Answer: True
Q3) _____________ is the type of accounting used by external parties.
Answer: Financial accounting
Q4) Which financial statement would you refer to in order to determine whether a company owed funds to creditors?
A)Statement of cash flows
B)Statement of retained earnings
C)Income statement
D)Balance sheet
Answer: D
Q5) Another name for net income of a business is _________________________. Answer: profits or earnings
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Chapter 2: Financial Statements and the Annual Report
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206 Verified Questions
206 Flashcards
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Sample Questions
Q1) If an investor can use accounting information for two different companies to evaluate the types and amounts of expenses,the information is said to have the quality of
A)comparability.
B)consistency.
C)neutrality.
D)understandability.
Answer: A
Q2) ____________________ is the magnitude of an omission or misstatement in accounting information that will affect the judgment of someone relying on the information.
Answer: Materiality
Q3) To determine the source of a company's noncurrent assets,on which financial statement will you look?
A)Income statement only
B)Balance sheet only
C)Both the balance sheet and the income statement
D)Both the income statement and the statement of retained earnings
Answer: B
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Page 4
Chapter 3: Processing Accounting Information
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180 Verified Questions
180 Flashcards
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Sample Questions
Q1) A(n)____________________ is a chronological record of all transactions entered into by a business.
Answer: JOURNAL
Q2) Payment of a cash dividend decreases both cash and stockholders' equity of the distributing business.
A)True
B)False
Answer: True
Q3) Explain what the chart of accounts is and how its numbering system works. Answer: Companies need a way to organize the large number of accounts they use to record transactions.A chart of accounts is a numerical list of all of the accounts an entity uses.The numbering system is a convenient way to identify accounts.For example,all asset accounts might be numbered from 100 to 199;liability accounts from 200 to 299;equity accounts from 300 to 399;revenues from 400 to 499;and expenses from 500 to 599.
Q4) The acquisition of a computer for $1,200,with a down payment of $200 cash and the signing of a $1,000 note payable for the balance,increases both assets and
Answer: liabilities
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Chapter 4: Income Measurement and Accrual Accounting
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219 Verified Questions
219 Flashcards
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Sample Questions
Q1) When is revenue from the sale of merchandise normally recognized?
A)On the date the sale is made
B)When the customer pays for the merchandise
C)Either on the date on which the sale occurs,or the date on which the customer pays
D)When the merchandise is sold,if sold for cash,or when payment is received,if sold on credit
Q2) A hospital corporation contracted with a private company to collect fees and maintain health facilities that adjoin its property.Users of the health facility can pay cash of $10 for a daily visit or they can purchase a pass.The pass has a magnetic strip that is swiped through the entrance device each time an individual enters the facility.This subtracts a daily fee from the pass balance for each day used.The passes are issued for a fee of $365,which are good for 365 days.Refunds are not issued on the pass.Last year,$18,650 was collected for daily visits,$438,000 of annual passes were issued,and $206,225 of pass usage was registered on the scanning equipment.How much should the company recognize as revenue for the year? Explain how the revenue recognition rule should be applied in this case.
Q3) ____________________ is a rise in the general level of prices in the economy and results in a decrease in purchasing power.
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6
Chapter 5: Inventories and Cost of Goods Sold
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222 Verified Questions
222 Flashcards
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Sample Questions
Q1) Accountants define the market value of inventory as its __________.
Q2) When did title to the merchandise transfer from Jay Zee Music Company to Park?
A)June 5,2017
B)June 10,2017
C)June 13,2017
D)Cannot be determined from the information provided
Q3) Transportation-in is
A)an operating expense.
B)recorded as a purchases expense in a periodic inventory system.
C)added to transportation-out as part of the calculation of cost of goods sold.
D)part of cost of goods purchased.
Q4) The inventory turnover ratio is defined as cost of goods sold divided by average inventory.
A)True
B)False
Q5) Net purchases equals purchases less purchase returns,allowances,and discounts plus transportation-in.
A)True
B)False
Q6) The cost of goods purchased is equal to net purchases plus __________.
Page 7
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Chapter 6: Cash and Internal Control
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) Euro Corp.began the year with $19,000 in cash and another $1,000 in cash equivalents.During the year,operations generated $132,000 in cash.Net cash used in investing activities during the year was $213,000,and the company raised a net amount of $168,000 from financing activities.
Required
Determine the year-end balance in cash and cash equivalents.
Q2) Which of the following items would be subtracted from the balance per books on a bank reconciliation?
A)Outstanding checks
B)Deposit in transit
C)Service charge assessed by the bank
D)Interest collected by the bank on a customer note
Q3) __________ controls within a company are more concerned with the efficient operation of the business and adherence to management policies than with the accurate reporting of financial information.
Q4) Describe procedures that you believe McDonald's may use to control the purchase and payment of food products.
Q5) What are at least four important internal control procedures?
Q6) What rational is used in order to determine if an amount is "cash"?
Page 8
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Chapter 7: Receivables and Investments
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192 Verified Questions
192 Flashcards
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Sample Questions
Q1) Where can the amounts needed to compute the accounts receivable turnover ratio be found?
A)The income statement
B)The balance sheet
C)The statement of cash flows
D)Both the income statement and balance sheet
Q2) The party that agrees to repay is the ____________________ of the note.
Q3) A general ledger account that is supported by a subsidiary ledger is called a(n)__________.
Q4) Which one of the following is not an accurate description of Allowance for Doubtful Accounts?
A)Contra account
B)Balance sheet account
C)Income statement account
D)Current asset account
Q5) If a company discounts a note at a bank,but still is contingently liable for the maturity value,then the note was discounted with __________.
Q6) Securities issued by corporations as a form of ownership in the business,such as common or preferred stock,are called __________.
Page 9
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Chapter 8: Operating Assets: Property, Plant, and Equipment, and Intangibles
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207 Verified Questions
207 Flashcards
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Sample Questions
Q1) What was the depreciation expense for Grove City Corp.for the year ended December 31,2017?
A)$0
B)$195,000
C)$390,000
D)$400,000
Q2) Calhoun,Inc.purchased equipment at the beginning of 2017 for $180,000.Calhoun decided to depreciate the equipment over a five-year period using the double-declining-balance method.Calhoun estimated the equipment's residual value at $30,000.Which of the following statements is correct concerning Calhoun's financial statements at December 31,2017?
A)The book value of the equipment is $108,000.
B)The book value of the equipment is $72,000.
C)The total accumulated depreciation is $90,000.
D)Depreciation expense for 2017 is $60,000.
Q3) Please complete the following sentences:
a.Accumulated amortization is used with _______________.
b.Accumulated depreciation is used with _______________.
Q4) Distinguish between current assets and operating assets.
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Chapter 9: Current Liabilities, Contingencies, and the Time Value of Money
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176 Verified Questions
176 Flashcards
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Sample Questions
Q1) Mackie's individual retirement account (IRA)currently has a balance of $100,000 and is earning 6%.Beginning one year from today,what equal annual amounts can be withdrawn from the IRA for ten years so that the balance after the tenth withdrawal is zero?
A)$10,000
B)$12,950
C)$13,587
D)$14,237
Q2) The total amount of simple interest calculated annually on a $6,000 note payable for three years at 11% is
A)$1,980.
B)$2,205.
C)$6,600.
D)$7,980.
Q3) Assume that you know the total dollar amount of a loan and the amount of the monthly payments.How can you determine the interest rate as a percentage of the loan?
Q4) What is the purpose of the current ratio? How does the quick ratio differ from the current ratio?
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Q5) The difference between notes payable and accounts payable is __________.
Chapter 10: Long-Term Liabilities
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185 Verified Questions
185 Flashcards
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Sample
Questions
Q1) An amortized premium is computed annually when a bond is issued for other than its face value.For a bond issued at a premium,how will this component change under the effective interest method as the bond approaches maturity?
A)Decrease
B)Increase
C)Remain constant
D)Not enough information given to decide
Q2) When a company has a credit balance in its Deferred Tax account,this amount would appear as a(n)
A)contra asset on the balance sheet.
B)stockholders' equity account on the balance sheet.
C)expense account on the income statement.
D)liability account on the balance sheet.
Q3) The Deferred Tax account should reflect permanent differences but not items that are temporary differences between book accounting and tax reporting.
A)True
B)False
Q4) __________ bonds may be retired by the issuing company before their specified due date.
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Chapter 11: Stockholders Equity
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203 Verified Questions
203 Flashcards
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Sample Questions
Q1) Walton Corporation shows the following in the Stockholders' Equity section of its balance sheet: The stated value of its common stock is $0.50,and the total balance in the Common Stock account is $37,500.Also noted is that 5,000 shares are currently designated as treasury stock.The number of shares outstanding is
A)80,000.
B)75,000.
C)72,500.
D)70,000.
Q2) Dividends in Arrears
A)is a liability account.
B)appears in the notes to the financial statements.
C)is a stockholders' equity account.
D)is a contra-stockholders' equity account.
Q3) Using the concept of comprehensive income,which of the following items is included as part of comprehensive income but not as part of net income?
A)Unrealized holding gains or losses
B)Accounting changes
C)Extraordinary items
D)Loss on sale of investments
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Page 13
Chapter 12: The Statement of Cash Flows
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192 Flashcards
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Sample Questions
Q1) When using the indirect method,how is the purchase of equipment for cash shown on the statement of cash flows?
A)As an operating activity
B)As an investing activity
C)As a financing activity
D)As a noncash investing and financing activity
Q2) The repurchase of a company's own stock should be reported on the statement of cash flows as an investing activity.
A)True
B)False
Q3) Review the data for Eastern Corp. ?
Required
Prepare the Operating Activities section of a statement of cash flows for Eastern Corp.for 2018 if the indirect method is used to determine net cash flow from operating activities.
Q4) Under the __________,a company reports its major classes of gross cash receipts and cash payments in the Operating Activities section of the statement of cash flows.
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Chapter 13: Financial Statement Analysis
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199 Verified Questions
199 Flashcards
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Sample Questions
Q1) Which of the following is considered a profitability ratio?
A)Earnings per share
B)Debt-to-equity ratio
C)Acid-test ratio
D)Inventory turnover ratio
Q2) The dollar change and percentage change in the Accounts Receivable account from 2017 to 2018 is calculated for Allison Corporation.This is an example of
A)horizontal analysis.
B)vertical analysis.
C)profitability analysis.
D)solvency assessment.
Q3) What do profitability ratios measure? Explain.
Q4) All line items in common-size comparative income statements are stated as a percentage of net income.
A)True
B)False
Q5) The most liquid of all assets is cash.
A)True
B)False
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Chapter 14: International Financial Reporting Standards
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Sample Questions
Q1) Explain the two primary legal systems used around the world and what these differences have to do with accounting standards.
Q2) Significant differences exist in terms on financial statements around the world.For example,another name for what we know as Contingent Liabilities in the United States is A)Share Capital.
B)Capital Reserves.
C)Provisions for Other Risks.
D)Deferred Income.
Q3) Japan has a greater number of differences than the United States between the amount of income reported to stockholders and that reported to the taxing authorities.
A)True
B)False
Q4) Explain some of the differences in accounting for operating assets that exist between U.S.GAAP and IFRS.
Q5) Explain the meaning of the terms contingent liabilities and provisions as they relate to U.S.GAAP and IFRS?
Q6) Summarize some of the common differences between U.S.GAAP and IFRS.
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Page 16