Financial Accounting
Final Exam
Course Introduction
Financial Accounting is an essential course that introduces students to the fundamental principles and practices of accounting, focusing on the preparation, analysis, and interpretation of financial statements. The course covers key concepts such as the accounting cycle, accruals and deferrals, revenue recognition, asset valuation, and the classification of liabilities and equity. It also emphasizes the importance of ethical standards and regulatory frameworks in financial reporting. By the end of the course, students will be equipped to analyze financial data, assess the financial health of organizations, and make informed business decisions using generally accepted accounting principles (GAAP).
Recommended Textbook
Financial Accounting Information for Decisions 6th Edition by John Wild
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16 Chapters
3236 Verified Questions
3236 Flashcards
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Chapter 1: Introducing Accounting in Business
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261 Flashcards
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Sample Questions
Q1) Which of the following accounting principles dictates when expenses are recognized?
A)Revenue recognition principle
B)Monetary unit principle
C)Business entity principle
D)Matching principle
E)Full disclosure principle
Answer: D
Q2) Distributions of assets by a business to its stockholders are called:
A)Dividends
B)Expenses
C)Assets
D)Retained earnings
E)Net Income
Answer: A
Q3) ______________ is the area of accounting aimed at serving external users.
Answer: Financial accounting
Q4) A ____________________ is a non-corporate business that is owned by only one person.
Answer: Sole proprietorship
Page 3
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Chapter 2: Analyzing and Recording Transactions
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Sample Questions
Q1) The third step in the analyzing and recording process is to post the information to _________________________.
Answer: Ledger accounts.
Q2) A debit entry is always favorable.
A)True
B)False
Answer: False
Q3) On November 30,a company had an Accounts Receivable balance of $5,100.During the month of December,total credits to Accounts Receivable were $76,000 from customer payments.The December 31 Accounts Receivable balance was $43,000.What was the amount of credit sales during December?
A)$8,100
B)$27,900
C)$70,900
D)$76,000
E)$113,900
Answer: E
Q4) ___________________ is a promise of payment from customers to sellers. Answer: Accounts receivable
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Chapter 3: Adjusting Accounts and Preparing Financial Statements
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268 Verified Questions
268 Flashcards
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Sample Questions
Q1) Expenses incurred but unpaid that are recorded during the adjusting process with a debit to an expense and a credit to a liability are:
A)Intangible expenses
B)Prepaid expenses
C)Unearned expenses
D)Net expenses
E)Accrued expenses
Answer: E
Q2) A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet.The Adjustments columns show expired insurance of $200.This adjusting entry results in:
A)$200 less in net income
B)$200 more in net income
C)$200 difference between the debit and credit columns of the Unadjusted Trial Balance
D)$200 of prepaid insurance
E)An error in the financial statements
Answer: A
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Chapter 4: Reporting and Analyzing Merchandising Operations
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196 Flashcards
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Sample Questions
Q1) Liquidity problems are likely to exist when a company's acid-test ratio:
A)Is less than the current ratio
B)Is 1 to 1
C)Is higher than 1 to 1
D)Is substantially lower than 1 to 1
E)Is higher than the current ratio
Q2) A ___________ inventory system updates the accounting record for inventory only at the end of a period.
Q3) What is the difference between the periodic and perpetual inventory systems?
Q4) Under the ___________ system,each purchase,purchase return and allowance,purchase discount and transportation-in transaction is recorded in a separate temporary account.
Q5) A company's cost of goods sold was $4,000.Determine net purchases and ending inventory given goods available for sale were $11,000 and beginning inventory was $5,000.
A)Net Purchases: $15,000; Ending Inventory: $7,000
B)Net Purchases: $10,000; Ending Inventory: $15,000
C)Net Purchases: $9,000; Ending Inventory: $6,000
D)Net Purchases: $6,000; Ending Inventory: $7,000
E)Net Purchases: $16,000; Ending Inventory: $20,000
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Chapter 5: Reporting and Analyzing Inventories
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Sample Questions
Q1) In the retail inventory method of inventory valuation,the retail amount of inventory refers to the dollar amount measured by looking at the selling prices of inventory items.
A)True
B)False
Q2) The _________________ method is commonly used to estimate the value of inventory that has been destroyed,lost or stolen.
Q3) A company's ability to pay its short-term obligations depends on many factors including how quickly it is able to sell its merchandise inventory.
A)True
B)False
Q4) LIFO inventory value is often less than the inventory's replacement cost because LIFO inventory is valued using the oldest purchase cost.
A)True
B)False
Q5) Randy Hetrick founded Fitness Anywhere,Inc.Why is managing inventory an important issue for his company?
Q6) Identify and describe the four inventory valuation methods.
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Page 7
Chapter 6: Reporting and Analyzing Cash and Internal Controls
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Sample Questions
Q1) Which of the following statements is true regarding the documents in a voucher system?
A)All voucher systems are the same
B)Recording a purchase is initiated by an invoice approval
C)A well designed voucher system will allow department managers to place orders directly with suppliers for control purposes
D)A voucher system is most commonly used in very small companies to make up for the lack of other internal controls
E)A well designed voucher system will eliminate all fraud and error
Q2) What is the purpose of the days' sales uncollected ratio?
Q3) A good voucher system includes a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.
A)True
B)False
Q4) A customer's check is deposited by a company.The check is uncollectible because the balance in the customer's account is not large enough to cover the check.This check is referred to as a __________ check.
Q5) What is a voucher system?
Page 8
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Chapter 7: Reporting and Analyzing Receivables
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169 Flashcards
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Sample Questions
Q1) Vine Company began operations on January 1,2010.During its first year,the company completed a number of transactions involving sales on credit,accounts receivable collections,and bad debts.These transactions are summarized as follows:
a. Sold \( \$ 1,348,300 \) of merchandise (that had cost \( \$ 983,600 \) ) on credit, terms \( \mathrm{n} / 30 \).
b. Wrote off \( \$ 19,400 \) of uncollectible accounts receivable.
c. Received \( \$ 666,100 \) cash in payment of accounts receivable.
d. In adjusting the accounts on December 31 , the company estimated that \( 2.90 \% \) of accounts receivable will be uncollectible
What is the amount required for the adjusting journal entry to record bad debt expense?
A)$18,644.90
B)$39,100.70
C)$19,783.80
D)$19,221.20
E)$19,400.20
Q2) ABC Co.sold $80,000 of accounts receivable to First Bank and incurred a 2% factoring fee.Prepare the journal entry for ABC Co.to record the sale.
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Chapter 8: Reporting and Analyzing Long-Term Assets
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Sample Questions
Q1) Plant assets are used in everyday operations of the business and have useful lives that extend over more than one accounting period.
A)True
B)False
Q2) A company purchased property for $100,000.The property included a building,a parking lot and land.The building was appraised at $62,000; the land at $45,000 and the parking lot at $18,000.The value of the land that will be included in the accounting record is:
A)$0
B)$36,000
C)$42,000
D)$45,000
E)$100,000
Q3) A company purchased equipment valued at $825,000 on January 1.The equipment has an estimated useful life of seven years or six million units.The equipment is estimated to have a salvage value of $35,000.Assuming the straight-line method of depreciation,what is the annual depreciation for the second year if .5 million units were produced?
Q4) What are the general accounting procedures for recording asset disposals?
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Chapter 9: Reporting and Analyzing Current Liabilities
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Sample Questions
Q1) ______________________ is the total compensation an employee earns including wages,salaries,commissions,bonuses and any compensation earned before deductions such as taxes.
Q2) The full disclosure principle requires the reporting of contingent liabilities that are reasonably possible.
A)True
B)False
Q3) The rate for FICA-social security is 6.2% and the rate for FICA-Medicare is 1.45%.Calculate the total amount of FICA withholding for an employee whose pay is $2,400 and is entirely subject to these FICA taxes.
Q4) __________ allowances are items that reduce the amount of federal income taxes owed by the individual.
Q5) A company's income before interest expense and income taxes in 2010 was $225,000 and $200,000 in 2011.Its interest expense was $45,000 for both years.Calculate the company's times interest earned ratio and comment on its level of risk.
Q6) What is a short-term note payable? Explain the accounting issues related to notes payable.
Q7) Describe how to account for and report on contingent liabilities. To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Reporting and Analyzing Long-Term Liabilities
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Sample Questions
Q1) A company borrowed $50,000 cash from the bank and signed a 6-year note at 7%.The present value factor for an annuity for 6 years at 7% is 4.7665.The annual annuity payments equal $10,490.The present value of the loan is:
A)$10,490
B)$11,004
C)$50,000
D)$52,450
E)$238,325
Q2) Amortizing a bond discount:
A)Allocates a part of the total discount to each interest period
B)Increases the market value of the Bonds Payable
C)Decreases the Bonds Payable account
D)Decreases interest expense each period
E)Increases cash flows from the bond
Q3) A bondholder that owns a $1,000,10%,10-year bond has:
A)Ownership rights
B)The right to receive $10 per year until maturity
C)The right to receive $1,000 at maturity
D)The right to receive $10,000 at maturity
E)The right to receive dividends of $1,000 per year
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Chapter 11: Reporting and Analyzing Equity
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Sample Questions
Q1) A discount on stock occurs when a corporation sells its stock for a price greater than par value.
A)True
B)False
Q2) A company issued 60 shares of $100 par value stock for $7,000 cash.The total amount of contributed capital is:
A)$100
B)$600
C)$1,000
D)$6,000
E)$7,000
Q3) The total amount of stock that a corporation's charter allows it to issue is referred to as:
A)Issued stock
B)Outstanding stock
C)Common stock
D)Preferred stock
E)Authorized Stock
Q4) Identify and discuss the key differences between common and preferred stock.
Q5) Identify and describe the two main components of stockholders' equity.
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Chapter 12: Reporting and Analyzing Cash Flows
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Sample Questions
Q1) Depreciation expense is not reported on the statement of cash flows when the direct method is used.
A)True
B)False
Q2) A main purpose of the statement of cash flows is to report all the major cash ________ and cash _______________.
Q3) Explain the purpose and format of the statement of cash flows.Also,describe its use to decision makers.
Q4) When analyzing the changes on a spreadsheet used to prepare a statement of cash flows,the cash flows from operating activities generally affect:
A)Net income,current assets and current liabilities
B)Noncurrent assets
C)Noncurrent liability and the equity accounts
D)Both noncurrent assets and noncurrent liabilities
E)Equity accounts only
Q5) The FASB requires the reporting of cash flows per share as a measure of earnings performance.
A)True
B)False
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Chapter 13: Analyzing and Interpreting Financial Statements
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186 Flashcards
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Sample Questions
Q1) Intracompany standards for financial statement analysis:
A)Are often based on a company's prior performance
B)Are often set by competitors
C)Are set by the company's industry
D)Are based on rules of thumb
E)Are published in Dun and Bradstreet
Q2) Ratios analysis eliminates all of the differences of GAAP versus IFRS financial reporting.
A)True
B)False
Q3) Liquidity refers to the availability of resources to meet short-term cash requirements.
A)True
B)False
Q4) Net income divided by net sales is equal to the:
A)Return on total assets
B)Profit margin
C)Current ratio
D)Total asset turnover
E)Days' sales in inventory
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Chapter 14: Investments and International Operations
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Sample Questions
Q1) A company owns $400,000 of 7% bonds that pay interest on October 1 and April 1.The amount of interest accrued on December 31 (the company's year-end)would be:
A)$4,667
B)$7,000
C)$28,000
D)$14,000
E)$9,333
Q2) Profit margin is calculated by sales divided by net income.
A)True
B)False
Q3) All companies desire a low return on total assets.
A)True
B)False
Q4) Consolidated financial statements show the financial position,results of operations and cash flows of all entities under the parent's control.
A)True
B)False
Q5) Foreign exchange rates fluctuate due to changing _______________ and ___________ conditions.
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Chapter 15: Reporting and Analyzing Partnerships
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Sample Questions
Q1) Chad Forrester is a limited partner in a sports management firm.During the previous year his return on partnership equity was 16%.The beginning balance in his capital account was $450,000 and his partnership net income for this year was $75,000.What was the balance in Chad's capital account at the end of last year?
A)$525,000
B)$937,500
C)$487,500
D)$468,750
E)$37,500
Q2) A partnership that has at least two classes of partners,general and limited,that allows the limited partners to have no personal liability beyond the amounts they invest in the partnership and the limited partners have no active role except as specified in the partnership agreement is a ________________________ partnership.
Q3) A partner can be admitted into a partnership by ________________________ or by ______________________________.
Q4) What are the ways a partner can withdraw from a partnership? Explain how to account for the withdrawal of a current partner from a partnership.
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Chapter 16: Reporting and Preparing Special Journals
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Sample Questions
Q1) Journal entries
A) Input devices
B) Information storage
C) Information processor
D) Output devices
E) Source document
Q2) Discuss the differences in the special journals between a company using a perpetual inventory system and one using a periodic inventory system.
Q3) The __________________ principle requires that an accounting information system conform with a company's activities,personnel and structure and must adapt to a company's unique characteristics.
Q4) The difference in the sales journal between the perpetual and periodic inventory systems is that a column is used to record cost of goods sold and inventory amounts for each sale under the perpetual system but not the periodic system.
A)True
B)False
Q5) Individual transactions in the sales journal are posted regularly to customers' accounts in the ________________________________________.
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