Financial Accounting II
Exam Answer Key
Course Introduction
Financial Accounting II builds upon the foundational concepts introduced in Financial Accounting I, focusing on more advanced accounting principles and procedures. This course delves into complex topics such as accounting for long-term assets and liabilities, stockholders equity, investments, revenue recognition, and cash flow statements. Emphasis is placed on understanding and applying International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). Students will analyze real-world financial statements, enhance their problem-solving skills, and develop a deeper understanding of how financial information supports business decision-making and satisfies regulatory requirements.
Recommended Textbook
Financial Accounting 4th Edition by Robert Kemp
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12 Chapters
1893 Verified Questions
1893 Flashcards
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Page 2
Chapter 1: Business, Accounting, and You
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) When revenue exceeds cost, it is referred to as:
A)loss.
B)profit.
C)value.
D)risk.
Answer: B
Q2) Rapid Repair buys a new machine for its shop on credit. The effect on the accounting equation is to:
A)increase Liabilities and increase Assets.
B)decrease Liabilities and increase Assets.
C)increase Assets and increase Stockholders' Equity.
D)increase Liabilities and decrease Stockholders' Equity.
Answer: A
Q3) Financial statements are prepared primarily for internal company use.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Analyzing and Recording Business Transactions
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152 Flashcards
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Sample Questions
Q1) Which of the following would start with a 2 in the chart of accounts?
A)Accounts Payable and Interest Payable
B)Common Stock and Dividends
C)Cash and Accounts Receivable
D)Sales and Service Revenue
Answer: A
Q2) Collection of money from a cash customer represents a(n):
A)liability.
B)expense.
C)revenue.
D)stock.
Answer: C
Q3) Which is NOT a part of Stockholders' Equity?
A)Revenues
B)Expenses
C)Accounts Receivable
D)Dividends
Answer: C
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4
Chapter 3: Adjusting and Closing Entries
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Sample Questions
Q1) Which of the following accounts is NOT affected by an accrued revenue?
A)Accounts Receivable
B)Rent Revenue
C)Unearned Rent Revenue
D)Interest Receivable
Answer: C
Q2) The unadjusted trial balance shows a $15,000 balance for Prepaid Rent. At the end of the year, $3,000 of the rent had been used. The adjusted trial balance reflects a balance for Prepaid Rent of:
A)$12,000 debit.
B)$12,000 credit.
C)$3,000 debit.
D)$3,000 credit.
Answer: A
Q3) Dividend accounts are closed by crediting them and debiting Retained Earnings.
A)True
B)False
Answer: True
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Chapter 4: Accounting for a Merchandising Business
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158 Verified Questions
158 Flashcards
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Sample Questions
Q1) The Balance Sheet format that reflects the accounting equation in its layout is the:
A)account form.
B)report form.
C)equation form.
D)liquidity form.
Q2) The amount of an invoice is $1,000, with terms 2/10, n/30. The amount to be paid within the discount period is:
A)$1,000.
B)$980.
C)$900.
D)$700.
Q3) In the perpetual inventory system, inventory is constantly updated through the inventory tracking system.
A)True
B)False
Q4) Debit card and credit card sales are counted as cash transactions.
A)True
B)False
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Chapter 5: Inventory
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Sample Questions
Q1) The historical gross profit percentage can be used to estimate the current period's gross profit.
A)True
B)False
Q2) Goods available for sale are $29,000; beginning inventory is $8,000; ending inventory is $15,000; and cost of goods sold is $10,000. The days-sales-in-inventory is closest to: (Round any intermediary calculations two decimal places, X.XX, and your final answer to the nearest day.)
A)460.
B)292.
C)420.
D)548.
Q3) Which of the following is often used when taking a physical inventory?
A)Pre-numbered count sheets
B)Tags to show what inventory has been counted
C)Maps of the location of the inventory
D)All of the above
Q4) Inventory is the most important asset in a service business.
A)True
B)False
Page 7
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Chapter 6: The Challenges of Accounting: Standards,
Internal Control, Audits, Fraud, and Ethics
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Sample Questions
Q1) Management and staff attitudes toward internal control are an important part of control activities.
A)True
B)False
Q2) Granting customers a lower sales price for something that benefits you in return would be an example of a:
A)disbursement scheme.
B)bribe or kickback.
C)cash register scheme.
D)check tampering scheme.
Q3) Kat Neese is an accountant at S&C Co. She suspects that her boss is making illegal adjustments to the accounting records after she gives them to him. If Kat doesn't say anything or report her suspicions, she has:
A)committed a crime.
B)protected the company from a lawsuit.
C)protected the stockholders.
D)committed an unethical act.
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Page 8
Chapter 7: Cash and Receivables
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Sample Questions
Q1) Using a 365-day year, the maturity value of a 55-day, 6% note for $22,000 rounded to the nearest cent is: (Do not round any intermediary calculations. Round your final answer to the nearest cent.)
A)$22,000.00.
B)$22,198.90.
C)$21,801.10.
D)$23,320.00.
Q2) As part of the procedure to properly control cash payments received in the mail, after the mailroom employee opens the cash receipts, the remittance advices go to the:
A)Controller.
B)accounting department.
C)Treasurer.
D)bank.
Q3) GAAP generally allows the direct write-off method for accounting for bad debts.
A)True
B)False
Q4) Cash is listed first on the Balance Sheet because it is the least liquid asset.
A)True
B)False
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Chapter 8: Long-Term and Other Assets
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Sample Questions
Q1) Which of the following would be debited as part of what you got in a transaction involving an exchange of assets?
A)Old machine
B)Equipment (new)
C)Accumulated Depreciation
D)Gain on exchange
Q2) A company purchased a computer system on March 1. Its cost was $40,000, and it had an estimated salvage value of $5,000. It was expected to have a useful life of five years. To the nearest dollar, the depreciation for year 1 using straight-line depreciation will be: (Assume company year-end is December 31. Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
A)$10,000.
B)$8,750.
C)$5,810.
D)$6,563.
Q3) Disposal of a plant asset always occurs after the asset has been fully depreciated.
A)True
B)False
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Chapter 9: Current Liabilities and Long-Term Debt
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Sample Questions
Q1) Bonds that can be exchanged for stock are called:
A)callable bonds.
B)serial bonds.
C)debenture bonds.
D)convertible bonds.
Q2) The journal entry to record $300,000 of bonds that were issued at 104 would be to:
A)debit Cash, $312,000; credit Bonds payable, $312,000.
B)debit Cash, $312,000; credit Bonds payable, $300,000; credit Premium on bonds payable, $12,000
C)debit Cash, $300,000; credit Bonds payable, $300,000.
D)debit Cash, $300,000; debit Discount on bonds payable, $12,000; credit Bonds payable, $312,000.
Q3) Debenture bonds are the same as:
A)term bonds.
B)serial bonds.
C)secured bonds.
D)unsecured bonds.
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11
Chapter 10: Corporations: Paid-In Capital and Retained Earnings
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Sample Questions
Q1) Payment of a cash dividend causes a(n):
A)increase in liabilities.
B)decrease in an assets.
C)increase in Stockholders' Equity.
D)increase in revenue.
Q2) For most companies, preemptive rights are the exception, rather than the rule.
A)True
B)False
Q3) Charmed, Inc. has 10,000 shares of treasury stock which it purchased for $10/share. It later resold 3,000 of those shares for $18/share. The amount to be credited to Paid-in Capital-Treasury Stock is:
A)$80,000.
B)$100,000.
C)$54,000.
D)$24,000.
Q4) Which of the following dates do NOT require a journal entry?
A)Date of payment
B)Date of record
C)Date of declaration
D)All dividend dates require a journal entry.
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) The cost of purchasing long-term assets, such as buildings and land, are:
A)added to operating activities.
B)subtracted from operating activities.
C)added to investing activities.
D)subtracted from investing activities.
Q2) Payments to suppliers include items such as employee compensation, interest and income taxes.
A)True
B)False
Q3) Are all increases to cash from financing activities the result of a favorable situation?
A)Yes, an increase to cash is always good.
B)No, cash could increase in this category as a result of replacing long-term assets.
C)Yes, this increase would reflect the results of the company's daily activities.
D)No, an increase in long-term debt might be the result of an unfavorable situation.
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13
Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) If Sydney Tea's net sales decreased from $90,000in year 1 to $49,000 in year 2 and its cost of goods sold decreased from $33,000 in year 1 to $19,000 in year 2, the vertical analysis based on sales would show the following for cost of goods sold for the two periods: (Round your final answer to the nearest percentage.)
A)37% and 39%.
B)39% and 37%.
C)273% and 258%.
D)258% and 273%.
Q2) Ironworks, Inc. has cost of goods sold for the years 2016, 2015 and 2014 respectively of $28,400, $26,400 and $25,100. If 2014 is the base year, the trend percentage for 2016 is: (Round your final answer to two decimal places, X.XX%.)
A)113.15%.
B)13.15%.
C)105.18%.
D)5.18%.
Q3) Most companies want a low inventory turnover ratio.
A)True
B)False
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