Financial Accounting I
Exam Questions
Course Introduction
Financial Accounting I introduces students to the foundational principles and practices of financial accounting, focusing on the preparation and analysis of financial statements for external users. The course covers essential topics such as the accounting cycle, double-entry bookkeeping, accrual accounting, and the treatment of assets, liabilities, and equity. Students will gain an understanding of Generally Accepted Accounting Principles (GAAP) and learn how to record transactions, adjust accounts, and prepare statements like the balance sheet, income statement, and statement of cash flows. This course equips students with the analytical tools needed to evaluate an organizations financial health and supports informed decision-making in business environments.
Recommended Textbook
Financial Accounting 1st Canadian Edition by Jeffrey Waybright
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12 Chapters
1471 Verified Questions
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Chapter 1: Business, Accounting, and You
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Sample Questions
Q1) Celia buys a new machine for her shop on credit. What effect does this have on the accounting equation?
Answer: Increase liabilities and increase assets.
Q2) Accounting is important because the process "keeps score" of the financial aspects of a business.
A)True
B)False
Answer: True
Q3) To manage a business effectively, an owner or manager would benefit greatly from having some knowledge of accounting.
A)True
B)False
Answer: True
Q4) Accounting principles include:
A) cost, revenue recognition, and going concern.
B) cost, revenue recognition, and timeliness.
C) cost, revenue recognition, and full disclosure.
D) cost, economic entity, and full disclosure.
E) cost, economic entity, and revenue recognition.
Answer: C
Page 3
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Chapter 2: Analyzing and Recording Business Transactions
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Sample Questions
Q1) Cash, common shares, and advertising expense have normal balances of __________, __________, and __________, respectively.
Answer: debit, credit, and debit
Q2) The act of recording a transaction is called "journalizing".
A)True
B)False
Answer: True
Q3) The fact that each transaction has a dual effect on the accounting equation provides the basis for what is called:
A) single-entry accounting.
B) double-entry accounting.
C) compound-entry accounting.
D) multiple-entry accounting.
E) re-allocation of accounting.
Answer: B
Q4) A promissory note owed to another company would most likely appear in which categories?
Answer: Notes payable
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4
Chapter 3: Adjusting and Closing Entries
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Sample Questions
Q1) Revenues are:
A) additions to retained earnings.
B) subtractions from retained earnings.
C) additions to net income.
D) subtractions from net income.
E) additions to expenses.
Answer: A
Q2) Net income or net loss can be determined by the adjusted trial balance figures.
A)True
B)False
Answer: True
Q3) Depreciation would be an example of a(n) __________.
Answer: deferred expense
Q4) A plot of land with a cost of $15,000, a salvage value of $3,000, and expected life of 20 years was purchased on September 1. What will be the depreciation expense recorded on December 31?
Answer: $0
Land is not depreciated.
Q5) Interest revenue would be an example of a(n) __________.
Answer: accrued revenue
5
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Chapter 4: Ethics, Internal Control, and Cash
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Sample Questions
Q1) A good internal control system does which of the following?
A) Guarantees the efficiency and effectiveness of operations
B) Reduces the risk of undetected errors
C) Provides absolute assurance that no errors will occur
D) Guarantees that fraud will be prevented
E) Reduces the risk of breaking the law
Q2) In a broad sense, fraud is the use of deception or trickery for personal gain.
A)True
B)False
Q3) Overbilling the company for parking fees or cab fare would be an example of a(n)
Q4) Name the two forms of fraud explained in your textbook.
Q5) Based on the fraud triangle, finding good reasons for doing things that we really know are wrong is an example of __________.
Q6) Having security measures, proper authorization channels, and restricted access to assets is an example of what element of internal control?
Q7) Provide examples of good control activities.
Q8) List the four parts of a well-defined internal control system.
Q9) Details that support business transactions make up a(n) __________.
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Chapter 5: Accounting for a Merchandising Business
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Sample Questions
Q1) The perpetual inventory system keeps a running record of inventory as it is bought and sold.
A)True
B)False
Q2) Prepare the journal entries in Retro's books for the following transactions assuming a periodic system.
March 1 Retro Corp. purchased $8,000 of merchandise from Alloy Corp. on account, terms 2/15, n/30. FOB shipping point. The goods cost Alloy $2,900.
March 9 Retro paid a $200 freight bill for delivery of the goods purchased on March 1.
March 11 Retro returned $1,000 of the merchandise purchased on March 1. The goods cost Alloy $450.
March 15 Retro paid for the March 1 purchase in full.
Q3) Journalize the following transactions for Jane Co. assuming the periodic system.
May 7 Jane Co. sold $6,900 of merchandise, costing $5,150 on account to Joan, terms 3/10, n/30 FOB Shipping
May 8 Jane Co. pre-pays $500 of shipping costs and charges Joan.
Q4) What does the acronym FOB stand for?
Q5) Why is cash listed as the first current asset?
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Chapter 6: Inventory
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Sample Questions
Q1) Armedio Enterprises lost its entire inventory in a hurricane that occurred on March 31, 2014.
Over the past five years, gross profit has averaged 30% of net sales. The company's records reveal the following data for the month of March:
Beginning Inventory $42,600, Net Purchases $259,900, Sales $430,500, and Sales Returns and Allowances $12,300
Estimate the inventory for the end of March using the gross profit method.
Q2) Goods such as milk, bread, and cheese would probably be costed using what method?
Q3) If a company has not recorded a significant write off of inventory in the financial statements, which principle has been violated?
A) Conservatism
B) Consistency
C) Materiality
D) Entity
E) cost principle
Q4) If ending inventory in Period 1 is overstated, gross profit in Period 2 is __________.
Q5) What accounting principle would be followed when underestimating inventory?
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Chapter 7: Sales and Receivables
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Sample Questions
Q1) The formula for the quick ratio is quick assets divided by non-current assets.
A)True
B)False
Q2) On March 1, 2012, Kelly Company lent $3,500 to Tim on a 1-year 6% promissory note. The amount of interest to be accrued on December 31 will be:
A) $210.00.
B) $175.00.
C) $157.50.
D) $140.00.
E) $176.00
Q3) On March 10, 2012, Allyson Enterprises determined that its customer Betty Chow's account for $780 was considered uncollectible. If Allyson uses the allowance method, what is the journal entry required to write off Betty Chow's account?
Q4) Assume that at December 31, 2013, Alyson Corporation has an Accounts Receivable balance of $240,000 and its Allowance for Doubtful Accounts balance is $13,900. Prepare a partial Balance Sheet showing the Accounts Receivable section.
Q5) A company with an accounts receivable turnover of 11.78 would be collecting its receivables about __________.
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Chapter 8: Long-Term Assets
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Sample Questions
Q1) Which intangible asset is recorded only when an acquiring company purchases another company?
Q2) Ordinary repairs are also called revenue expenditures because the expense is matched against the revenues for the period.
A)True B)False
Q3) Machinery that cost $57,000 and had accumulated depreciation of $46,000 was sold for $2,500. What is the journal entry to record this disposal?
Q4) What do you obtain when you take the cost divided by the total amount of the natural resource?
Q5) If an extraordinary repair is incorrectly expensed in the current period, what is the effect on the net income for the current period and for future periods?
Q6) The process of allocating the cost of natural resources is called depletion. A)True B)False
Q7) What is the formula to calculate straight-line depreciation?
Q8) Under Canadian ASPE, at what value is Property, Plant, and Equipment recorded on the balance sheet?
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Chapter 9: Current Liabilities and Long-Term Debt
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Sample Questions
Q1) Which of the following would be considered an estimated liability?
A) Notes payable
B) Warranties payable
C) Pending litigation
D) Sales tax payable
E) Federal tax payable
Q2) Amanda Industries, a private company, has a contingent liability estimated at $125,000 with a 70%-95% likelihood of the obligation occurring What is the appropriate accounting treatment for the company?
Q3) Which of the following would be considered a known liability?
A) Federal income tax payable
B) Warranties payable
C) Pending litigation
D) Notes payable
E) Both federal income tax payable and notes payable
Q4) A mortgage is a special type of long-term note payable.
A)True
B)False
Q5) A $300,000 issue of bonds that sold at 105 will cost __________.
Q6) A liability, such as warranties payable, would be an example of a(n) __________.
Page 11
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Chapter 10: Corporations: Share Capital and Retained Earnings
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Sample Questions
Q1) What journal entry is recorded on the date of payment?
Q2) Tammy Corporation has 350,000 common shares outstanding. They have declared a 5% stock dividend. The current market price of the common shares is $7.50/share. The amount that will be debited to retained earnings on the date of declaration is:
A) $52,500.
B) $131,250.
C) $78,750.
D) $183,750.
E) $121,350.
Q3) A corporation may issue shares for other than cash, requiring the recording of the assets at current market value.
A)True
B)False
Q4) Contributed Capital includes Share Capital and Retained Earnings.
A)True
B)False
Q5) Aztec Industries has 100,000 common shares outstanding and 10,000 $2 cumulative preferred shares. If the company declares a total dividend of $35,000, how much will be distributed to common shareholders?
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Chapter 11: The Cash Flow Statement
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Sample Questions
Q1) Changes in the long-term assets and long-term liabilities accounts must be analyzed to determine how they are presented in the operating section of a cash flow statement.
A)True
B)False
Q2) In the direct method of preparing a cash flow statement, interest received and interest expense are in the __________ activities section.
Q3) Business transactions that do NOT involve the payment or receipt of cash are considered to be __________ transactions.
Q4) What is the formula for free cash flow?
Q5) Which would NOT be subtracted from net income in the operating section of an indirect cash flow statement?
A) An increase in prepaid expenses
B) An increase in accounts payable
C) A decrease in accounts payable
D) An increase in notes receivable
E) An decrease in inventory
Q6) An increase in long-term mortgage payable would mean an increase in cash flow from __________ activities.
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) Patty's Baker has cost of goods sold for the years 2011, 2010, and 2009 respectively of $28,600, $26,900, and $25,600. If 2009 is the base year, the trend percentage for 2011 is:
A) 111.72%.
B) 11.72%.
C) 105.08%.
D) 5.08%.
E) 104.9%.
Q2) Rick's has a cash balance of $80,000; short-term investments of $20,000; net receivables of $60,000; and inventory of $450,000. Current liabilities total $200,000. Ricks' acid test (quick ratio) is within __________.
Q3) Net income was $45,000 in 2009 and $60,000 in 2010. The percentage increase or decrease in net income from 2009 to 2010 was __________.
Q4) Which section of the income statement does NOT report net of income taxes or net of income tax savings?
Q5) Inventory and prepaid expenses are NOT included in the computation of the __________ ratio.
Q6) Statements that are often used to compare similar businesses are called:
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