Financial Accounting I
Final Exam Questions
Course Introduction
Financial Accounting I introduces students to the fundamental principles and practices of financial accounting. The course emphasizes the accounting cycle, including the identification, measurement, recording, and communication of financial information for external users. Students learn how to prepare, analyze, and interpret financial statements such as the balance sheet, income statement, and cash flow statement, in accordance with generally accepted accounting principles (GAAP). Key topics include the double-entry system, accrual accounting, adjusting entries, and the ethical responsibilities of accountants. By the end of the course, students will have a solid foundation in the language of business and basic accounting concepts essential for further study in accounting and business.
Recommended Textbook
Financial Accounting 6th Edition by Walter T. Harrison
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11 Chapters
1425 Verified Questions
1425 Flashcards
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Page 2
Chapter 1: The Financial Statements
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) The amount of net income shown on the income statement also appears on the:
A) balance sheet
B) statement of assets
C) statement of financial position
D) statement of retained earnings
Answer: D
Q2) Cost of goods sold is:
A) added to sales on the income statement
B) deducted from sales on the balance sheet
C) deducted from sales on the income statement
D) added to sales on the retained earnings statement
Answer: C
Q3) Increases in shareholders' equity arise from:
A) investments by the owner
B) payment of dividends
C) net income earned during the period
D) both investments by the owner and net income earned during the period
Answer: D
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Chapter 2: Recording Business Transactions
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) The normal balance of the Common Shares account is a ________ because it increases ________.
A) debit; assets
B) credit; shareholders' equity
C) credit; liabilities
D) debit; expenses
Answer: B
Q2) The accounting transaction to record payment of the advertising bill would include a:
A) debit to Cash
B) credit to Accounts Payable
C) debit to Advertising Expense
D) debit to Accounts Receivable
Answer: C
Q3) What is the first step in the journalizing process?
A) Enter the transaction in the journal.
B) Identify the transaction from source documents and other information.
C) Determine what accounts will be affected and whether to debit or credit them.
D) Post the transaction to the ledger.
Answer: B
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Chapter 3: Accrual Accounting and the Financial Statements
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) A journal entry contains a debit to the Cash account and a credit to the Unearned Service Revenue account.This is an example of a(n):
A) deferred expense
B) accrued expense
C) accrued revenue
D) deferred revenue
Answer: D
Q2) The closing entry for utilities expense would include:
A) a debit to Utilities Expense and a credit to Retained Earnings
B) a debit to net income and a credit to Utilities Expense
C) a debit to Utilities Expense and a credit to net income
D) a debit to Retained Earnings and a credit to Utilities Expense
Answer: D
Q3) The post closing trial balance contains which of the following accounts?
A) Service Revenue
B) Cost of Goods Sold
C) Retained Earnings
D) Depreciation Expense
Answer: C
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Chapter 4: Cash and Receivables
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155 Verified Questions
155 Flashcards
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Sample Questions
Q1) All cash receipts should be deposited for safekeeping in the bank.
A)True
B)False
Q2) One of the benefits of extending credit to customers is the possibility of increased sales.
A)True
B)False
Q3) Cash collected from accounts receivable is shown on the cash flow statement as a(n):
A) operating activity
B) investing activity
C) financing activity
D) either as an operating activity or as a financing activity
Q4) If a bank reconciliation included deposits in transit amounting to $1,500,the journal entry to record this reconciling item would include:
A) no entry is required
B) a credit to Accounts Receivable for $1,500
C) a debit to Cash for $1,500
D) a credit to Cash for $1,500
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Chapter 5: Inventory and Cost of Goods Sold
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104 Verified Questions
104 Flashcards
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Sample Questions
Q1) Previously written down inventory does not need to be reassessed as it is at its lowest value.
A)True
B)False
Q2) An understatement in ending inventory results in an overstatement of gross profit.
A)True
B)False
Q3) FIFO income typically is less realistic compared to the net income under weighted-average cost.
A)True
B)False
Q4) Under a periodic inventory system,which of the following entries would record the purchase of merchandise on credit?
A) Debit Inventory and credit Accounts Payable
B) Credit Purchases and debit Cost of Goods Sold
C) Credit Sales and debit Accounts Receivable
D) Debit Purchases and credit Accounts Payable
Q5) State some methods retailers might use to increase the gross margin on sales.
Q6) What is the most important asset of a merchandising business?
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Chapter 6: Property, plant, and Equipment, and Intangible Assets
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) Hot Wort Ltd.purchased equipment on April 1,2017,for $140,000.The residual value is $20,000 and the estimated life is 6 years or 55,000 hours.Compute depreciation expense for the year ending December 31,2017 if Hot Wort Ltd.uses the straight-line method of depreciation.
A) $15,000
B) $20,000
C) $14,988
D) $19,983
Q2) Copyrights are granted for the life of the author plus:
A) 10 years
B) 40 years
C) 50 years
D) 100 years
Q3) Carrying amount is defined as:
A) cost less salvage value
B) cost less accumulated depreciation
C) current market value less salvage value
D) current market value less accumulated depreciation
Q4) A loss will result on the sale of property,plant,and equipment when the book value of the asset exceeds the cash received.
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Chapter 7: Investments and the Time Value of Money
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) On January 1,2016,TXU Europe Corporation purchased 40% of the outstanding stock of Alberta Power Pool Corporation for $800,000.Net income reported by Alberta Power Pool Corporation for 2016 and 2017 was,respectively,$100,000 and $125,000.Dividends paid by Alberta Power Pool Corporation during 2016 and 2017 were,respectively,$60,000 and $75,000.The long-term investment will appear on TXU Europe Corporation's December 31,2017,balance sheet at:
A) $746,000
B) $864,000
C) $836,000
D) $890,000
Q2) Amortizing a discount on a bond investment will cause the Investment account and interest revenue to respectively:
A) decrease and increase
B) increase and decrease
C) increase and increase
D) decrease and decrease
Q3) Why is understanding the extent to which ATCO Ltd.influences another company important for accounting purposes? What impact does the degree of influence ATCO Ltd.has over another company have on accounting?
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Page 9
Chapter 8: Liabilities
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103 Verified Questions
103 Flashcards
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Sample Questions
Q1) Explain the accounting process for warranties.Be specific and include in your discussion the principle that governs the accounting method.
Q2) The account Discount on Bonds Payable is a contra account to the account Bonds Payable.
A)True
B)False
Q3) On December 16,2016,the ACE Corporation purchases $15,000 of equipment by issuing a 30-day,12% note payable.The total amount of interest due on the note is:
A) $73.97
B) $147.95
C) $800.00
D) $1,800.00
Q4) A bond issued at a price above its maturity or par value is sold at a premium.
A)True
B)False
Q5) Describe the two interest rates included in setting the price of a bond.
Q6) The interest paid to a bond holder is tax deductible.
A)True
B)False
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Chapter 9: Shareholders Equity
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119 Flashcards
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Sample Questions
Q1) Which of the following is a disadvantage of the corporate form of business organization?
A) mutual agency
B) unlimited liability
C) difficulty in transferring ownership
D) governmental regulation at both the federal and provincial levels
Q2) On January 1,2017,Balises Corporation's Retained Earnings account has a balance of $300,000.During 2014,cash dividends of $20,000 were declared and stock dividends with a market value of $40,000 were declared.Net income for 2017 amounted to $90,000.On June 30,2017,Balises Corporation issued 5,000 shares of common shares at $10 per share.What is the balance in Retained Earnings appearing on the statement of shareholders' equity on December 31,2017?
A) $420,000
B) $380,000
C) $330,000
D) $440,000
Q3) Describe the rights typically enjoyed by common shareholders.
Q4) When shares are issued,their stated value is set by the board of directors.
A)True
B)False
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Chapter 10: The Statement of Cash Flows
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133 Verified Questions
133 Flashcards
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Sample Questions
Q1) Only the operating activities section of a statement of cash flows is prepared differently when using the indirect method.
A)True
B)False
Q2) Activities which lead to an increase or decrease in long-term debt of a corporation are referred to as:
A) operating activities
B) investing activities
C) financing activities
D) future debt activities
Q3) The purchase of land for cash and the sale of a capital asset are viewed as:
A) a negative and positive item on the statement of cash flows
B) a positive and negative item on the statement of cash flows
C) both positive items on the statement of cash flows
D) neither positive nor negative items on the statement of cash flows
Q4) Which of the following would not appear on a statement of cash flows?
A) payments to a supplier
B) cash sales
C) cost of goods sold
D) proceeds from issuance of common shares
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Chapter 11: Financial Statement Analysis
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116 Flashcards
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Sample Questions
Q1) Horizontal analysis involves the study of:
A) percentage changes in comparative financial statements
B) percentage and/or dollar amount changes in various financial statement amounts from year to year
C) the change in key financial statement ratios over a certain time frame or horizon
D) the changes in individual financial statement amounts as a percentage of some related total
Q2) If the assets shown on a balance sheet are subjected to vertical analysis (using total assets as the base),an increase in the figure for non-current assets from 40% to 55% would always mean that:
A) total non-current assets have increased as a percentage of total assets
B) the dollar amount of current assets has decreased
C) total current assets have decreased as a percentage of total assets
D) total non-current assets have increased as a percentage of total assets and total current assets have decreased as a percentage of total assets
Q3) Name some common financial ratios used by investors to compare different companies.
Q4) Identify three cash flow signs of a healthy company.
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