Financial Accounting Review
Questions
Course Introduction
Financial Accounting introduces the fundamental principles and procedures used to record, summarize, and report the financial activities of organizations. This course covers the preparation and analysis of essential financial statements, including the balance sheet, income statement, and cash flow statement. Students learn about the accounting cycle, the use of debits and credits, and the application of generally accepted accounting principles (GAAP). Through practical exercises and real-world examples, learners gain the skills necessary to interpret financial data and make informed economic decisions within a business context.
Recommended Textbook
Introductory Financial Accounting for Business 1st Edition by Thomas Edmonds
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14 Chapters
1326 Verified Questions
1326 Flashcards
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Page 2
Chapter 1: An Introduction to Accounting
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99 Flashcards
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Sample Questions
Q1) Chow Company earned $1,500 of cash revenue,paid $1,200 for cash expenses,and paid a $200 cash dividend to its owners.Which of the following statements is true?
A) The net cash inflow from operating activities was $100.
B) The net cash outflow for investing activities was $200.
C) The net cash inflow from operating activities was $300.
D) The net cash outflow for investing activities was $100.
Answer: C
Q2) The Financial Accounting Standards Board is a privately funded organization with authority for establishing accounting standards for businesses in the US.
A)True
B)False
Answer: True
Q3) Borrowing money from the bank is an example of an asset source transaction. A)True
B)False
Answer: True
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Chapter 2: Accounting for Accruals
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Sample Questions
Q1) Revenue on account amounted to $9,000.Cash collections of accounts receivable amounted to $8,100.Cash paid for operating expenses was $7,500.The amount of employee salaries accrued at the end of the year was $900.What was the net cash flow from operating activities?
A) $900
B) $600
C) $1,500
D) $8,700
Answer: B
Q2) Which of the following is an asset exchange transaction?
A) Issued common stock
B) Accrued salary expense at the end of the accounting period
C) Collected cash on accounts receivable
D) Earned cash revenue for services provided
Answer: C
Q3) The balance in accounts receivable represents the amount of cash the company is required to pay in the future.
A)True
B)False Answer: False
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Chapter 3: Accounting for Deferrals
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Sample Questions
Q1) A deferral
A) exists when a company receives cash after recognizing the associated revenue.
B) exists when a company receives cash at the same time the associated revenue is recognized.
C) exists when a company receives cash before recognizing the associated revenue.
Answer: C
Q2) Purchasing supplies for cash is an asset exchange transaction.
A)True
B)False
Answer: True
Q3) On September 1,Year 1,Zelda Company collected $120,000 cash for services to be provided for one year beginning immediately.The company's fiscal closing date is December 31.Based on this information,the amount of revenue appearing on the Year 1 income statement would be
A) $30,000
B) $40,000
C) $80,000
D) $120,000
Answer: B
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Page 5
Chapter 4: Accounting for Merchandising Businesses
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104 Flashcards
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Sample Questions
Q1) What is the effect of recording the purchase of inventory on account under the perpetual inventory system?
A) Total assets increase
B) Total liabilities increase
C) Total assets are unaffected
D) Total assets and total liabilities increase
Q2) JJ Co.purchased on account merchandise with a list price of $10,000.Payment terms were 1/15,n/45.If collection occurs before the discount expires,what is the effect of the sales discount on the balance sheet?
A) Decreases accounts receivable
B) Decreases inventory
C) Increases accounts payable
D) Increases cash
Q3) The term FOB shipping point indicates that the seller is responsible for freight costs.
A)True
B)False
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6
Chapter 5: Accounting for Inventories
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84 Flashcards
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Sample Questions
Q1) When prices are rising,which method of inventory,if any,will result in the lowest relative net cash outflow (including the effects of taxes,if any)?
A) LIFO
B) FIFO
C) Weighted average
D) None of these; the choice of inventory methods does not affect cash flows.
Q2) One of the disadvantages of the specific identification inventory cost flow method is that it can allow managers of a business to manipulate the amount of income the business reports.
A)True
B)False
Q3) If a company uses the FIFO cost flow method for its income tax return it must also use FIFO for financial reporting.
A)True
B)False
Q4) The last-in,first-out cost flow method assigns the cost of the items purchased first to ending inventory.
A)True
B)False
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Chapter 6: Internal Control and Accounting for Cash
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76 Flashcards
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Sample Questions
Q1) Which of the following will be caused by recording the customer's NSF check?
A) Accounts receivable increases.
B) Cash decreases.
C) stockholders' equity decreases.
D) Accounts receivable increases and cash decreases.
Q2) Which of the following procedures are typically used when a petty cash fund is established?
A) Assigning a petty cash custodian
B) Use of petty cash vouchers
C) Physical control over the petty cash fund
D) All of these procedures are used when a petty cash fund is established
Q3) To ensure proper segregation of duties,after the check is signed,an employee should record the check in the accounting records and review the appropriate supporting documents.
A)True
B)False
Q4) Establishment of a petty cash fund is an asset exchange transaction.
A)True
B)False
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Chapter 7: Accounting for Receivables
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Sample Questions
Q1) If a company uses the percent of receivables method to estimate uncollectible accounts,the company will first determine the required ending balance in Allowance for Doubtful Accounts; the Uncollectible Accounts Expense will be the difference between that amount and the balance in the Allowance for Doubtful Accounts.
A)True
B)False
Q2) Making a loan to another party is considered an investing activity on the statement of cash flows.
A)True
B)False
Q3) What does the accounts receivable turnover ratio measure?
A) How quickly accounts receivable turn into cash
B) How quickly the accounts receivable balance increases
C) Average balance of accounts receivables
D) How quickly inventory turns into accounts receivable
Q4) The operating cycle is the average time that a company spends acquiring inventory to sell.
A)True
B)False
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Chapter 8: Accounting for Long-Term Operational Assets
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Sample Questions
Q1) What value will be reported for the building on the balance sheet?
A) $175,000
B) $950,000
C) $800,000
D) $1,100,000
Q2) On April 1,Year 1,Fossil Energy Company purchased an oil producing well at a cash cost of $12,000,000.It is estimated that the oil well contains 600,000 barrels of oil,of which only 500,000 can be profitably extracted.By December 31,Year 1,25,000 barrels of oil were produced and sold.What is depletion expense for Year 1 on this well?
A) $800,000
B) $600,000
C) $480,000
D) $500,000
Q3) With an accelerated depreciation method,an asset can be depreciated below its salvage value.
A)True
B)False
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Chapter 9: Accounting for Current Liabilities and Payroll
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Sample Questions
Q1) Which of the following terms describes the ability to generate short-term cash flows?
A) Profitability
B) Solvency
C) Stockholder's Equity
D) Liquidity
Q2) Which of the following is not an item deducted from salary expense to arrive at net pay?
A) FICA tax for Social Security
B) FICA tax for Medicare
C) Federal unemployment tax
D) These answer choices are all deducted from salary expense to arrive at net pay
Q3) Based on this information alone,what amount of cash flow from operating activities would appear on the Year 2 statement of cash flows?
A) $770 inflow
B) $1,400 inflow
C) $38,520 outflow
D) $1,120 outflow
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Chapter 10: Accounting for Long-Term Debt
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Sample Questions
Q1) The times-interest-earned ratio is usually calculated as the ratio of net income to interest expense.
A)True
B)False
Q2) Bonds sold as separate components of a single issue may have different maturity dates.
A)True
B)False
Q3) Davis Corporation borrowed $50,000 on January 1,Year 1.The loan is for a 5-year period and has an annual interest rate of 9%.At the end of each year,Davis will make a payment of $7,791,which includes both principal and interest.The amount of the payment for Year 1 that is interest expense is $4,500.
A)True
B)False
Q4) Which of the following describes a callable bond?
A) Can be called for early retirement at the option of the issuer
B) Can be called for early retirement at the option of the bondholder
C) Convertible to common stock at the option of the bondholder
D) Convertible to common stock at the option of the issuer
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Chapter 11: Proprietorships, partnerships, and Corporations
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Sample Questions
Q1) Which of the following is not normally a preference given to the holders of preferred stock?
A) The right to receive a specified amount of dividends prior to any being paid to common stockholders.
B) The right to vote before the common stockholders at the corporation's annual meeting.
C) The right to receive preference over common stockholders as to the distribution of assets during a liquidation process.
D) All of these are preferences given to preferred stock.
Q2) An appropriation of retained earnings restricts the amount of dividends that a corporation can declare in the future.
A)True
B)False
Q3) A high price-earnings ratio generally means that investors are optimistic about a company's future growth.
A)True B)False
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Page 13
Chapter 12: Statement of Cash Flows
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Sample Questions
Q1) How is the cash paid to purchase land reported in the statement of cash flows?
A) Cash outflow from financing activities
B) Schedule of noncash investing and financing activities
C) Cash outflow from investing activities
D) Cash inflow from operating activities
Q2) Statler Corporation has beginning and ending accounts payable balances of $400 and $800,respectively.Inventory had beginning and ending balances of $700 and $600,respectively.If cost of goods sold was $2,800,how much cash was spent to purchase inventory?
A) $2,100
B) $2,500
C) $2,700
D) $2,300
Q3) If a company sells equipment at a loss,the loss from selling the equipment is reported in the investing activities section of the statement of cash flows.
A)True
B)False
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Chapter 13: The Double-Entry Accounting System
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Sample Questions
Q1) Which of the following statements about the entry to record depreciation is true?
A) The entry involves a credit to a liability.
B) The entry involves a credit to Depreciation Expense.
C) The entry involves a credit to the asset being depreciated.
D) The entry involves a credit to a contra-asset account.
Q2) What is the amount of total assets that will be reported on the balance sheet as of December 31,Year 1?
A) $12,600
B) $13,800
C) $7,200
D) $10,600
Q3) Valley Packaging Company's adjusted trial balance showed a zero balance in retained earnings.Which of the following is the most likely explanation for this?
A) Valley reported zero net income in the current year.
B) Valley's trial balance will be out of balance until closing entries are recorded.
C) The current year was Valley's first year in business.
D) An error must have been made in preparing Valley's trial balance.
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Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Which ratio compares the earnings per share of a company to the market price for a share of the company's stock?
A) Price-earnings ratio
B) Dividend yield
C) Book value per share
D) Return on equity
Q2) Grove Corporation had sales of $3,000,000,cost of sales of $2,250,000,and average inventory of $500,000.What was Grove's inventory turnover ratio for the period?
A) 1.6 times
B) 6 times
C) 4.5 times
D) 23 times
Q3) Short-term creditors are usually most interested in assessing:
A) Liquidity.
B) Solvency.
C) Managerial effectiveness.
D) Profitability.
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