Financial Accounting II
Question Bank
Course Introduction
Financial Accounting II builds on the foundational principles introduced in the first course by exploring more advanced topics in financial accounting and reporting. This course delves into the recognition, measurement, and disclosure of complex transactions, such as those concerning long-term liabilities, shareholders' equity, investments, revenue recognition, and accounting for income taxes, pensions, and leases. Students will learn how to apply relevant accounting standards to prepare and analyze financial statements, ensuring compliance with regulatory frameworks. Emphasis is placed on interpreting financial data to support decision-making and communicating results to stakeholders. Through case studies and practical exercises, students develop the skills required for accounting roles in a variety of organizations.
Recommended Textbook
Financial Accounting 4th Edition by Robert Kemp
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Chapter 1: Business, Accounting, and You
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Sample Questions
Q1) Which of the following would be reported in the Investing Activities section of the Statement of Cash Flows?
A)Sale of common stock
B)Purchase of equipment
C)Payment of dividends
D)Both A and C would be in this section.
Answer: B
Q2) Cash accounting recognizes business transactions when cash is received or paid.
A)True
B)False
Answer: True
Q3) Consider Accounts Receivable and Accounts Payable. Which of the following statements is TRUE?
A)Accounts Receivable is a liability and Accounts Payable is an asset.
B)Accounts Receivable is an asset and Accounts Payable is an asset.
C)Accounts Receivable is an asset and Accounts Payable is a liability.
D)Accounts Receivable is a liability and Accounts Payable is a liability.
Answer: C
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3
Chapter 2: Analyzing and Recording Business Transactions
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Sample Questions
Q1) The required accounting period for a trial balance is one year.
A)True
B)False Answer: False
Q2) Accounts that increase on the credit side are Assets, dividends and Expenses (ADE).
A)True
B)False Answer: False
Q3) Anthoney Inc's trial balance contains the following balances: Cash $533 Accounts Payable $347 Revenue $671
Accounts Receivable $280 Expenses $205
What is the amount of total credits for this trial balance?
A)$552
B)$1,018
C)$1,484
D)$1,689 Answer: B
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Chapter 3: Adjusting and Closing Entries
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Sample Questions
Q1) After preparing the adjusted trial balance, those figures are used to complete the Balance Sheet only.
A)True
B)False
Answer: False
Q2) If revenues are recognized and recorded when earned, the company is using the:
A)cash basis of accounting.
B)accrual basis of accounting.
C)adjustment basis of accounting.
D)the expense basis of accounting.
Answer: B
Q3) Recording Prepaid Rent would be an example of a(n):
A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.
Answer: A
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Chapter 4: Accounting for a Merchandising Business
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Sample Questions
Q1) Which of the following characterizes Walmart?
A)Walmart both purchases and sells products.
B)Walmart sells products but doesn't purchase products.
C)Walmart purchases products but doesn't sell products.
D)Walmart neither purchases nor sells products.
Q2) Gross profit percentage is computed by dividing net sales by cost of goods sold.
A)True
B)False
Q3) The Statement of Retained Earnings for a merchandiser is prepared differently than that of a service business.
A)True
B)False
Q4) Amazon.com is an example of a wholesaler.
A)True
B)False
Q5) A list of credit customers is called a(n):
A)Accounts Payable subsidiary ledger.
B)general ledger.
C)Accounts Receivable subsidiary ledger.
D)general journal.
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Chapter 5: Inventory
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Sample Questions
Q1) When merchandise is sold and the perpetual system of inventory is used, the journal entry to record a sale of merchandise on account would include:
A)debiting Accounts Receivable and crediting Sales.
B)debiting Accounts Receivable and crediting Inventory.
C)debiting Accounts Receivable and crediting Cost of Goods Sold.
D)debiting Cost of Goods Sold and crediting Accounts Receivable.
Q2) If ending inventory in Period 1 is overstated, gross profit in Period 2 is:
A)overstated.
B)understated.
C)not affected.
D)the same as in Period 1.
Q3) Goods such as milk, bread, and cheese need to be sold quickly due to potential spoilage. Therefore, they would probably be costed using the:
A)LIFO method of inventory costing.
B)FIFO method of inventory costing.
C)average cost method of inventory costing.
D)any method as the physical flow and the cost flow are different.
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Chapter 6: The Challenges of Accounting: Standards, Internal
Control, Audits, Fraud, and Ethics
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Sample Questions
Q1) A requirement that customers receive a receipt is an example of:
A)monitoring.
B)information and communication.
C)control activities.
D)risk assessment.
Q2) Cash register schemes are a form of:
A)employee embezzlement.
B)bribe.
C)fraudulent financial reporting.
D)management fraud.
Q3) Internal control is a comprehensive system that helps an organization do all of the following EXCEPT:
A)safeguard assets.
B)safeguard liabilities.
C)operate efficiently and effectively.
D)ensure compliance with applicable laws and regulations.
Q4) Currently, most European countries are using International Financial Reporting Standards.
A)True B)False
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Chapter 7: Cash and Receivables
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Sample Questions
Q1) Once the merchandise is received from the supplier, the company:
A)issues an invoice.
B)issues a check.
C)completes a purchase order.
D)completes a receiving report.
Q2) Allied Inc. has an Account Receivable balance of $27,500 and its Allowance for Uncollectible Accounts balance is $1,250. How will this be reported on the Balance Sheet?
A)Accounts Receivable 27,500 Less: Allowance for Uncollectible Accounts 1,250 Accounts Receivable, Net $26,250
B)Accounts Receivable $26,250
C)Accounts Receivable, Net of Allowance for Uncollectible Accounts of $1,250 $26,250
D)Both A and C are acceptable ways to report Accounts Receivable.
Q3) On a bank reconciliation, outstanding checks are:
A)added to the book balance.
B)added to the bank balance.
C)subtracted from the book balance.
D)subtracted from the bank balance.
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Chapter 8: Long-Term and Other Assets
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Sample Questions
Q1) Investments in debt securities, may be classified as either current or long-term assets based on their maturity date.
A)True
B)False
Q2) The footnotes to the financial statements will include a description of the intangible asset and its estimated useful life.
A)True B)False
Q3) If an asset is being discarded then there is no need to update the depreciation prior to disposal.
A)True
B)False
Q4) After an asset is fully depreciated, the asset:
A)must be removed from the Balance Sheet.
B)remains on the Balance Sheet at a value of $0.
C)remains on the Balance Sheet at (cost - Accumulated Depreciation).
D)remains on the Balance Sheet at cost.
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Chapter 9: Current Liabilities and Long-Term Debt
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Sample Questions
Q1) $300,000 of 6%, 20-year bonds were sold for $330,000 on January 1. The bonds require semiannual interest payments on June 30 and December 31. The entry to record the June 30 interest payment on the bonds would be to: (Round your final answer to the nearest dollar.)
A)debit Interest Expense $9,000; credit Cash, $9,000.
B)debit Interest Expense $9,750; credit Premium on bonds payable, $750; credit Cash, $9,000.
C)debit Interest Expense $8,250; debit Premium on bonds payable, $750; credit Cash, $9,000.
D)debit Interest Expense $8,250; credit Cash, $8,250.
Q2) Withheld payroll deductions become:
A)assets of the employer.
B)liabilities of the employer.
C)revenues of the employer.
D)liabilities of the employee.
Q3) Which of the following would be considered a known liability?
A)Accounts payable
B)Warranties payable
C)Pending litigation
D)Possible contingency payable
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Chapter 10: Corporations: Paid-In Capital and Retained Earnings
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Sample Questions
Q1) Mike's Motors has 220,000 shares of $6-par common stock outstanding. They have declared a 10% stock dividend. The current market price of the common stock is $14/share. The amount that will be credited to Common Stock on the date of declaration is:
A)$132,000.
B)$440,000.
C)$308,000.
D)$184,800.
Q2) The entry to record S&C, Inc. selling 1,500 shares of $9 par common stock for $22 per share would be to:
A)debit Cash $33,000; credit Common Stock $33,000.
B)debit Cash $33,000; credit Common Stock $13,500; credit Paid-In Capital in Excess of Par-Common Stock $19,500.
C)debit Cash $13,500; credit Common Stock $13,500.
D)debit Cash $13,500; debit Paid-In Capital in Excess of Par-Common $19,500; credit Common Stock $33,000.
Q3) Treasury stock decreases the number of outstanding shares of stock.
A)True
B)False
Page 12
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) The Vintage Boutique had net income of $53,000. Accounts Receivable increased by $28,000; inventory decreased by $18,000; accounts payable increased by $4,000 and salaries payable decreased by $1,200. The amount of cash flow from operating activities under the indirect method is:
A)$40,200.
B)$45,800.
C)$58,200.
D)$68,200.
Q2) Business transactions that do NOT involve the payment or receipt of cash are considered to be non-cash transactions.
A)True B)False
Q3) The purpose of the Statement of Cash Flows is to show: A)the revenue earned.
B)the profits that were earned.
C)the expenses that were paid.
D)how cash was received and used during the period.
Q4) Cash received from issuing stock would be included in investing activities. A)True B)False
Page 13
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) A company with an Accounts Receivable turnover of four means that the company collects its receivables approximately every ________ days.
A) 30
B) 60
C) 90
D)120
Q2) The goal of the investing decision is to obtain money at the lowest possible cost.
A)True
B)False
Q3) Most companies want a low inventory turnover ratio.
A)True
B)False
Q4) A high dividend yield means that stockholders are receiving a large return in the form of dividends.
A)True B)False
Q5) Keeping prices low is an example of a business strategy.
A)True B)False
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