Financial Accounting
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Course Introduction
Financial Accounting introduces students to the fundamental concepts and principles governing the preparation, interpretation, and analysis of financial statements. The course covers key topics such as the accounting cycle, accruals and deferrals, revenue recognition, valuation of assets and liabilities, and the structure of financial reports. Emphasis is placed on understanding how financial information is used by stakeholders for decision-making, the regulatory environment, and the ethical responsibilities of accountants. Through practical exercises and case studies, students develop the skills necessary to record financial transactions and evaluate the financial health of businesses across various industries.
Recommended Textbook
Financial Accounting 8th Edition by Walter T. Harrison
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13 Chapters
1996 Verified Questions
1996 Flashcards
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Page 2
Chapter 1: The Financial Statements
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162 Verified Questions
162 Flashcards
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Sample Questions
Q1) The Statement of Cash Flows is divided into which three categories?
A)Operating, investing, and financing activities
B)Planning, executing, and evaluating activities
C)Increasing, decreasing, and non-cash activities
D)Developing, producing, and marketing activities
Answer: A
Q2) Accounts receivable would appear on the:
A)Balance Sheet with the current liabilities.
B)Balance Sheet with the current assets.
C)Income Statement with the revenues.
D)Statement of Retained Earnings with the net income.
Answer: B
Q3) The major forms of business organizations are proprietorships, partnerships, and for-profit organizations.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Transaction Analysis
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131 Flashcards
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Sample Questions
Q1) The entry to record the purchase of supplies on account would include a debit to:
A)Supplies.
B)Accounts Payable.
C)Supplies Expense.
D)Retained Earnings.
Answer: A
Q2) ABC Company had a beginning Accounts Receivable balance of $10,000, and had $12,000 of sales on account for the month. The ending Accounts Receivable balance was $14,000. Collections on Accounts Receivable for the month:
A)were $12,000.
B)were $36,000.
C)were $8,000.
D)can't be determined from the information given.
Answer: C
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Chapter 3: Accrual Accounting Income
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Sample Questions
Q1) The matching principle includes two steps:
A)measure the expenses and record the revenue.
B)identify all the expenses incurred during the accounting period and measure the expenses and match them against the revenue earned.
C)when to record revenue and the amount of revenue to record,
D)when to record the revenue and identify all the expenses incurred during the accounting period.
Answer: B
Q2) If depreciation for the current period is not recorded, net income for the current period will be understated.
A)True
B)False
Answer: False
Q3) The time-period concept requires a company to report accounting information at regular intervals.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Internal Control Cash
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Sample Questions
Q1) In the Amex Product story, Melissa Price, the employee who committed the fraud:
A)was one of Amex's most trusted employees.
B)never took a day of vacation for 10 years.
C)had begun to wear better clothes and drive nice cars.
D)did all of the above.
Q2) When a company receives cash by mail, the bank deposit for the cash receipts should be made by the:
A)mail room clerk.
B)certified public accountant.
C)controller.
D)treasurer.
Q3) The means by which accounting information enters and exits a company is the:
A)control environment.
B)information database.
C)monitoring of controls.
D)information system.
Q4) A compensating balance requires a borrower to maintain a maximum balance in a checking account.
A)True
B)False
Page 6
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Chapter 5: Short-Term Investments Receivables
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165 Verified Questions
165 Flashcards
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Sample Questions
Q1) Alex Rhodes' net sales for the current period were $114,000 and average receivables were $96,250. What is the amount of one day's sales (rounded)?
A)$312
B)$264
C)$427
D)$557
Q2) The balance in the Allowance for Uncollectible Accounts is considered prior to the year end adjustment under:
A)the direct write-off method.
B)the percent-of-sales method.
C)the aging-of- receivables method.
D)both the percent-of-sales and aging-of- receivables method.
Q3) The use of the allowance method of accounting for bad debts is preferred over the direct write-off method because of the:
A)matching principle.
B)historical cost principle.
C)revenue recognition principle.
D)full disclosure principle.
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Chapter 6: Inventory and Cost of Goods Sold
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Sample Questions
Q1) If prices are rising and a company is using LIFO, large purchases of inventory near the end of the year will:
A)increase income taxes paid.
B)decrease income taxes paid.
C)not change the value of ending inventory.
D)do none of the above.
Q2) When inventory costs are increasing with no LIFO liquidation:
A)FIFO cost of goods sold will be higher than LIFO cost of goods sold.
B)FIFO ending inventory will be lower than LIFO ending inventory.
C)FIFO cost of goods sold will be lower than LIFO cost of goods sold.
D)FIFO and LIFO will result in the same cost of goods sold and ending inventory.
Q3) Charles Scrab Inc. has beginning inventory of $15,000, purchases of $25,000, and ending inventory of $10,000, sales of $75,000, operating expenses of $30,000, and a tax rate of 40% for 2008. An accounting clerk input the ending inventory as $12,000. What is the effect on 2008 net income?
A)Net income will be $1,200 higher.
B)Net income will be $1,200 lower.
C)Net income will be $2,000 higher.
D)Net income will be $2,000 lower.
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Page 8
Chapter 7: Plant Assets Intangibles
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Sample Questions
Q1) Which of the following statements regarding depreciation for a partial year is NOT true?
A)If an asset is not purchased at the beginning of the year, depreciation must be computed only for the portion of the year the company held the asset.
B)Many businesses record no monthly depreciation on assets purchased after the 15<sup>th</sup> of the month.
C)An asset purchased on June 5 will be depreciated for seven months for the first year.
D)An asset purchased on June 5 will be depreciated for six months for the first year.
Q2) The length of service that a business expects to get from an asset as expressed in years, units of output, miles or other measures is the:
A)depreciable cost.
B)estimated useful life.
C)salvage value.
D)accelerated depreciation method.
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9
Chapter 8: Liabilities
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Sample Questions
Q1) Obligations that are due beyond one year or after the company's normal operating cycle if longer than a year are:
A)current liabilities.
B)estimated liabilities.
C)long-term liabilities.
D)current installment of long-term debt.
Q2) Which is the preferred method to use when amortizing a bond discount or premium?
A)Effective-interest method of amortization
B)Market-interest rate method of amortization
C)Straight-line method of amortization
D)Both straight-line and market-interest rate methods of amortization are equally preferable
Q3) According to GAAP, the interest paid semiannually on a bond payable can always be computed using straight-line method.
A)True
B)False
Q4) The time value of money states that money earns interest over time.
A)True
B)False
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Chapter 9: Stockholders Equity
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Sample Questions
Q1) A corporation will often utilize the services of an underwriter to sell its stock.
A)True
B)False
Q2) The number of shares of stocks outstanding is the same as the number of stock that is:
A)issued to the shareholders.
B)authorized by the board of directors.
C)currently in the hands of the stockholders.
D)ready to be sold to shareholders.
Q3) The reissuance of treasury stock at a price above its cost is reported in the statement of cash flows:
A)operating activities section.
B)investing activities section.
C)financing activities section.
D)financing and operating activities sections.
Q4) The retained earnings account is a reservoir of cash for paying dividends to the stockholders.
A)True B)False
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Chapter 10: Long-Term Investments International Operations
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Sample Questions
Q1) The Hammer Company paid $1,300,000 to purchase 35% of the outstanding stock of the Anvil Corporation. Anvil Corporation reports $425,000 of net income and pays a cash dividend of $115,000. These three events will increase Hammer Company's Investment account from $0 to:
A)$ 40,250.
B)$1,610,000.
C)$1,408,500.
D)$1,725,000.
Q2) The Allowance to Adjust Investment to Market is a companion account to Long-Term Investments.
A)True B)False
Q3) An investor company with a 40% interest in an investee debited the Investment account for $70,000 and credited the account for $55,000. Based on this information, the investee must have paid dividends of:
A)$6,000.
B)$22,000.
C)$28,000.
D)$137,500.
Page 12
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Chapter 11: The Income Statement the Statement of
Stockholders Equity
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Sample Questions
Q1) U.S. GAAP and IFRS always have the same revenue recognition criteria.
A)True
B)False
Q2) Which of the following would probably be reported as an extraordinary gain or loss?
A)Retiring bonds payable
B)Corporate restructuring
C)A natural disaster
D)All of the above
Q3) The amount of tax to pay the government in the next period is known as:
A)income tax expense.
B)income tax payable.
C)deferred tax asset.
D)deferred tax liability.
Q4) Which of the following statements is TRUE?
A)The income tax return and the financial statements are the same documents.
B)The income tax return is prepared using GAAP.
C)The income tax return is prepared using rules set by the IRS.
D)Taxable income is found on the income statement.
Page 13
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Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) A firm's revenue-earning activities appear on the statement of cash flows as:
A)investing activities.
B)operating activities.
C)financing activities.
D)both operating and financing activities.
Q2) Increases and decreases in the long-term assets available to a company are reported on the statement of cash flows as:
A)investing activities.
B)financing activities.
C)operating activities.
D)both operating and investing activities.
Q3) 1.1.income statement for the year is:
A)$59,500.
B)$62,500.
C)$53,500.
D)$61,000.
Q4) Investments that do NOT require cash can be reported on a separate schedule under the statement of cash flows.
A)True
B)False
Page 14
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) On the statement of cash flows of a healthy company, net cash from operating activities generally exceeds net income.
A)True
B)False
Q2) The ratio that measures the percentage of a stock's market value that the company returns to the stockholders as dividends is the:
A)dividend yield.
B)return on equity.
C)price/earnings ratio.
D)earnings per share.
Q3) If over a period of time, a company's major source of cash is from the sale of plant assets, this may be a sign of financial difficulty.
A)True
B)False
Q4) 1.ratio for the year ended December 31, 2011, was:
A)11.88.
B)11.38.
C)22.75.
D)10.88.
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