Financial Accounting I Final Exam
Course Introduction
Financial Accounting I introduces students to the foundational principles and practices of financial accounting. This course covers the accounting cycle, including the analysis and recording of business transactions, preparation of financial statements, and understanding key accounting concepts such as accruals, deferrals, and the matching principle. Emphasis is placed on the preparation and interpretation of income statements, balance sheets, and cash flow statements in accordance with generally accepted accounting principles (GAAP). Students will also develop analytical skills to assess the financial health of organizations and understand the ethical considerations in financial reporting.
Recommended Textbook
Financial Accounting 15th Edition by Carl Warren
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Page 2
Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) Which type of accountant typically practices as an individual or as a member of a public accounting firm?
A)Certified Public Accountant
B)Certified Payroll Professional
C)Certified Internal Auditor
D)Certified Management Accountant
Answer: A
Q2) Which of the following is not a business entity?
A)entrepreneurship
B)proprietorship
C)partnership
D)corporation
Answer: A
Q3) Krammer Company has liabilities equal to one-fourth of the total assets.Krammer's owner's equity is $45,000.Using the accounting equation,what is the amount of liabilities for Krammer?
Answer: 11ed8cf6_2c80_df3a_8feb_7f70308411c1_TB6239_11
Q4) Determine the total assets at the end of the current year for Scott Industries.
Answer: 11ea8d32_2886_1b09_b445_61d4ae52ab44_TB6239_00
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Chapter 2: Analyzing Transactions
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Sample Questions
Q1) The totals at the bottom of the trial balance and the totals at the bottom of the balance sheet both show equality and balancing and therefore should be equal.
A)True
B)False
Answer: False
Q2) On January 12,JumpStart purchased $870 in office supplies.
(a)Journalize this transaction as if JumpStart paid cash.
(b)Journalize this transaction as if JumpStart placed it on account.
(c)On January 18,JumpStart pays the amount due.Journalize this event.
Answer: 11ea8d32_287a_aa11_b445_63a45fad1fe7_TB6239_00
11ea8d32_287a_d122_b445_f15a71b05b08_TB6239_00
11ea8d32_287a_d123_b445_e1a564c481e4_TB6239_00
Q3) Which of the following groups of accounts increases with a credit?
A)capital, revenues, expenses
B)assets, capital, revenues
C)liabilities, capital, revenues
D)None of these choices
Answer: C
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) The financial statements are prepared from the unadjusted trial balance.
A)True
B)False Answer: False
Q2) Adjusting entries affect only expense and asset accounts.
A)True
B)False Answer: False
Q3) Data for an adjusting entry described as "accrued wages,$2,020" requires a
A)debit to Wages Expense and a credit to Wages Payable
B)debit to Wages Payable and a credit to Wages Expense
C)debit to Accounts Receivable and a credit to Wages Expense
D)debit to Dividends and a credit to Wages Payable
Answer: A
Q4) The estimated amount of depreciation on equipment for the current year is $5,300.Journalize the adjusting entry to record the depreciation. Answer: 11ea8d32_286a_a42d_b445_b98bbdc100cf_TB6239_00
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Page 5
Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Which of the following statements indicates that a company earned a net income for the period?
A)The sum of the credits exceeds the sum of the debits in the Balance Sheet columns on the end-of-period spreadsheet.
B)The sum of the credits exceeds the sum of the debits in the Income Statement columns on the end-of-period spreadsheet.
C)The sum of the debits exceeds the sum of the credits in the Income Statement columns on the end-of-period spreadsheet.
D)Cash inflows exceed cash outflows.
Q2) Examples of temporary accounts are supplies and prepaid expenses which are in the ledger for just a short time before they expire.
A)True
B)False
Q3) Debts listed as current liabilities are those that
A)will be paid in less than one year
B)are due to be paid in 5 to 10 years
C)are due to be paid in more than one year
D)are owed to the owner and will never be paid
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6
Chapter 5: Accounting Systems
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Sample Questions
Q1) When Richard Miller purchases a fishing pole through Amazon.com,he is utilizing
A)B1C e-commerce
B)B2B e-commerce
C)B2C e-commerce
D)B1B e-commerce
Q2) The presence of a subsidiary ledger requires the presence of a summarizing control account in the general ledger.
A)True
B)False
Q3) The term B2C refers to transactions conducted between two companies.
A)True
B)False
Q4) The means by which the accounting system collects,summarizes,and reports accounting information is called information
A)reporting methods
B)accounting methods
C)control methods
D)processing methods
Q5) Briefly describe the three-step process of accounting system development.
Q6) What is a business segment? How can business segments be analyzed?
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Chapter 6: Accounting for Merchandising Businesses
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Sample Questions
Q1) Which account will be included in closing entries of both service and merchandising companies?
A)Sales
B)Cost of Merchandise Sold
C)Customer Refunds Payable
D)Estimated Inventory Returns
Q2) Sales to customers who use bank credit cards such as MasterCard and VISA are usually recorded by a
A)debit to Bank Credit Card Sales, a debit to Credit Card Expense, and a credit to Sales
B)debit to Cash and a credit to Sales
C)debit to Cash, a credit to Credit Card Expense, and a credit to Sales
D)debit to Sales, a debit to Credit Card Expense, and a credit to Cash
Q3) Merchandise is sold for cash.The selling price of the merchandise is $6,000 and the sale is subject to a 7% state sales tax.The journal entry to record the sale would include a credit to
A)Cash for $6,000
B)Sales for $6,240
C)Sales Tax Payable for $420
D)Sales for $5,580
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Page 8
Chapter 7: Inventories
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Sample Questions
Q1) Generally,the lower the days' sales in inventory,the better.
A)True
B)False
Q2) A perpetual inventory system is an effective means of control over inventory.
A)True
B)False
Q3) During periods of increasing costs,an advantage of the LIFO inventory cost method is that it matches more recent costs against current revenues.
A)True
B)False
Q4) If ending inventory for the year is overstated,owner's equity reported on the balance sheet at the end of the year is understated.
A)True
B)False
Q5) In valuing merchandise for inventory purposes,net realizable value is the estimated selling price less any direct costs of disposal.
A)True
B)False
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Chapter 8: Internal Control and Cash
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Sample Questions
Q1) Journal entries based on the bank reconciliation are required in the company's accounts for
A)outstanding checks
B)deposits in transit
C)bank errors
D)book errors
Q2) The debit balance in Cash Short and Over at the end of an accounting period is reported as
A)an expense on the income statement
B)income on the income statement
C)an asset on the balance sheet
D)a liability on the balance sheet
Q3) A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695.This item would be included in the bank reconciliation as a (n)
A)deduction from the balance per the company's records
B)addition to the balance per the bank statement
C)deduction from the balance per the bank statement
D)addition to the balance per the company's records
Q4) List and define each of the five elements of internal control.
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Chapter 9: Receivables
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Sample Questions
Q1) If the direct write-off method of accounting for uncollectible receivables is used,what general ledger account is debited to write off a customer's account as uncollectible?
A)Uncollectible Accounts Receivable
B)Accounts Receivable
C)Allowance for Doubtful Accounts
D)Bad Debt Expense
Q2) When a note is received from a customer on account,it is recorded by debiting Notes Receivable and crediting Accounts Receivable.
A)True
B)False
Q3) When an account receivable that has been written off is subsequently collected,the account receivable must first be reinstated before recording the receipt of payment.
A)True
B)False
Q4) List at least three indicators that a receivable may be uncollectible.
Q5) When a note is written to settle an open account,no entry is necessary.
A)True
B)False
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Chapter 10: Long-Term Assets: Fixed and Intangible
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Sample Questions
Q1) Fences around land at new business location
A)Land improvements
B)Buildings
C)Land
D)Machinery and equipment
Q2) Both the initial cost of the asset and the accumulated depreciation will be taken off the books with the disposal of the asset.
A)True
B)False
Q3) Land acquired so it can be resold in the future is listed on the balance sheet as a (n)
A)fixed asset
B)current asset
C)investment
D)intangible asset
Q4) The double-declining-balance method of depreciation uses a declining percentage rate in determining the depreciation amount.
A)True
B)False
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Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) Aqua Construction installs swimming pools.It calculates that warranty obligations are 5% of sales.For the year just ending,Aqua's sales were $1,500,000.Previous quarterly entries debiting Warranty Expense totaled $48,700.Determine the estimated warranty expense for the year and make the journal entry necessary to bring the account to the needed balance.
Q2) Vacation pay payable is reported on the balance sheet as a (n)
A)current liability or long-term liability, depending on when the vacations will be taken by employees
B)current liability
C)expense
D)long-term liability
Q3) An interest-beating note is a loan in which the lender deducts interest from the amount loaned before the money is advanced to the borrower.
A)True
B)False
Q4) Receiving payment prior to delivering goods or services causes a current liability to be incurred.
A)True
B)False
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Chapter 12: Accounting for Partnerships and Limited Liability Companies
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Sample Questions
Q1) Benton and Orton are partners who share income in the ratio of 1:3 and have capital balances of $70,000 and $30,000,respectively.Ramsey is admitted to the partnership and is given a 40% interest by investing $20,000.What is Benton's capital balance after admitting Ramsey?
A)$20,000
B)$7,000
C)$70,000
D)$63,000
Q2) The statement of members' equity is used for equity reporting of a partnership. A)True
B)False
Q3) A partnership's asset accounts should be changed from cost to fair market value when a new partner is admitted to a firm or an existing partner withdraws or dies. A)True B)False
Q4) When compared to a corporation,one of the major advantages of a partnership is its relative ease of formation.
A)True
B)False
Page 14
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Chapter 13: Corporations: Organization, stock Transactions, and Dividends
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Sample Questions
Q1) The charter of a corporation provides for the issuance of 100,000 shares of common stock.Assume that 30,000 shares were originally issued and 5,000 were subsequently reacquired.What is the number of shares outstanding?
A)35,000
B)70,000
C)25,000
D)30,000
Q2) The excess of sales price of treasury stock over its cost should be credited to A)Treasury Stock Receivable
B)Premium on Capital Stock
C)Paid-In Capital from Sale of Treasury Stock
D)Income from Sale of Treasury Stock
Q3) The primary purpose of a stock split is to reduce the number of shares outstanding in order to encourage more investors to enter the market for the company's shares.
A)True
B)False
Q4) Cash dividends become a liability to a corporation on the date of record.
A)True
B)False
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Chapter 14: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) A corporation issues for cash $1,000,000 of 10%,20-year bonds,interest payable annually,at a time when the market rate of interest is 12%.The straight-line method is adopted for the amortization of bond discount or premium.Which of the following statements is true?
A)The amount of annual interest expense is computed at 10% of the bond carrying amount at the beginning of the year.
B)The amount of annual interest expense gradually decreases over the life of the bonds.
C)The amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity.
D)The bonds will be issued at a premium.
Q2) If bonds are issued at a premium,the stated interest rate is
A)higher than the market rate of interest
B)lower than the market rate of interest
C)too low to attract investors
D)adjusted to a higher rate of interest
Q3) Given the following data,determine the times interest earned ratio.Net income,$70,000Bonds payable,issued at face value,8%,$5,000,000Preferred stock,$50 par value,6%,10,000 shares issued and outstandingTax rate is 30%
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Chapter 15: Investments and Fair Value Accounting
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Sample Questions
Q1) Unrealized gains and losses on trading securities are not included in the calculation of income from operations.
A)True
B)False
Q2) The price that would be received to sell an asset or pay off a liability is the
A)fair value
B)market value
C)investing value
D)historical value
Q3) Which of the following items would not affect the investor's income for the period?
A)interest received on a temporary investment in bonds
B)dividends received on a long-term investment in stock where the investor owns 10% of the investee's stock
C)dividends received on a long-term investment in stock where the investor owns 30% of the investee's stock
D)interest received on a long-term investment in bonds
Q4) Discuss the similarities and differences in reporting trading securities,available-for-sale securities,and held-to-maturity securities.
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17
Chapter 16: Statement of Cash Flows
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Sample Questions
Q1) If accounts payable have increased during a period,
A)revenues on an accrual basis are less than revenues on a cash basis
B)expenses on an accrual basis are less than expenses on a cash basis
C)expenses on an accrual basis are the same as expenses on a cash basis
D)expenses on an accrual basis are greater than expenses on a cash basis
Q2) Under the direct method of preparing a statement of cash flows,the gain on the sale of land is not adjusted or reported as part of cash flows from operating activities.
A)True
B)False
Q3) Land costing $140,000 was sold for $173,000 cash.The gain on the sale was reported on the income statement as other income.On the statement of cash flows,what amount should be reported as an investing activity from the sale of land?
A)$173,000
B)$140,000
C)$313,000
D)$33,000
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18
Chapter 17: Financial Statement Analysis
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Sample Questions
Q1) The number of days' sales in inventory is one means of expressing the relationship between the cost of goods sold and inventory.
A)True
B)False
Q2) Unusual items affecting the current period's income statement consist of changes in accounting principles and discontinued operations.
A)True
B)False
Q3) On a common-sized balance sheet,100% is
A)total property, plant, and equipment
B)total current assets
C)total liabilities
D)total assets
Q4) In a common-sized income statement,each item is expressed as a percentage of net income.
A)True
B)False
Q5) Define solvency and profitability.How are they alike?
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