Financial Accounting
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Course Introduction
Financial Accounting introduces students to the fundamental principles and concepts of accounting, focusing on the systematic recording, summarizing, and reporting of business financial transactions. The course covers essential topics such as the accounting cycle, preparation of financial statements, measurement of assets and liabilities, and the analysis of financial information for external stakeholders. Emphasis is placed on the application of generally accepted accounting principles (GAAP), the ethical dimensions of financial reporting, and the development of critical skills needed for informed decision-making in a business environment.
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) Purchasing equipment is considered an operating activity on the Statement of Cash Flows.
A)True
B)False
Answer: False
Q2) Which of the following financial statements illustrates the accounting equation?
A)Statement of Retained Earnings
B)Income Statement
C)Balance Sheet
D)Statement of Cash Flows
Answer: C
Q3) Net income is defined as:
A)revenue plus expenses.
B)revenue less assets.
C)expenses less revenue.
D)revenue less expenses.
Answer: D
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Page 3
Chapter 2: Analyzing and Recording Business Transactions
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) The ___________ account tracks a company's cumulative earnings less dividends.
A)Retained Earnings
B)Cash
C)Common Stock
D)Revenues
Answer: A
Q2) On the trial balance, which account balances should be listed in the credit column?
A)Liabilities, Retained Earnings, and Revenues
B)Assets, Retained Earnings, and Expenses
C)Liabilities, Common Stock, and Expenses
D)Assets, Dividends, and Expenses
Answer: A
Q3) Salaries of $1,025 were paid in cash. The journal entry would include a:
A)debit to Salaries Expense and a credit to Cash.
B)credit to Salaries Expense and a debit to Cash.
C)debit to Accounts Payable and a credit to Cash.
D)debit to Accounts Payable and a credit to Salary Expense.
Answer: A
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Page 4
Chapter 3: Adjusting and Closing Entries
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Sample Questions
Q1) Recording Social Security Taxes Payable would be an example of a(n):
A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.
Answer: C
Q2) Wages that have been accrued need to be recorded so that the matching principle is reflected in Wages Expense.
A)True
B)False
Answer: True
Q3) The balance of Retained Earnings on the adjusted trial balance does not represent the final Retained Earnings balance on the Balance Sheet.
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) Renoir, Inc. has gross profit of $93,400, operating expenses of $34,000, interest expense of $900 and 2,000 average shares of stock outstanding. What is Renoir's Earnings per Share?
A)$29.70
B)$29.25
C)$3.37
D)$3.42
Q2) The general public usually purchase merchandise from wholesalers.
A)True
B)False
Q3) FOB means:
A)first on board.
B)from our buyer.
C)fee on board.
D)free on board.
Q4) A low gross profit percentage means that:
A)the cost of goods sold was relatively low.
B)the cost of goods sold was relatively high.
C)selling expenses are very low.
D)general and administrative expenses are very high.
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Chapter 5: Inventory
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155 Flashcards
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Sample Questions
Q1) The ending inventory of one year becomes the beginning inventory of the next year.
A)True
B)False
Q2) Which account would always be used for an inventory adjustment?
A)Sales
B)Purchase Returns and Allowances
C)Cost of Goods Sold
D)Cash
Q3) Other than the cost of purchasing the inventory, another large cost of inventory would be storage of the inventory.
A)True
B)False
Q4) GAAP allows two different kinds of inventory costing methods.
A)True
B)False
Q5) If the ending inventory is overstated in Year 1, then the Cost of Goods Sold will be overstated in Year 2.
A)True
B)False
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Chapter 6: The Challenges of Accounting: Standards, Internal
Control, Audits, Fraud, and Ethics
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Sample Questions
Q1) Removing any of the components of the Fraud Triangle:
A)ensures that fraud will be eliminated.
B)makes it more likely that fraud will increase.
C)has no impact on the occurrence of fraud.
D)makes it less likely that fraud will occur.
Q2) Which element of internal control deals with a company having large amounts of cash on hand?
A)Control environment
B)Control activities
C)Information and communication
D)Risk assessment
Q3) According to the text, there are three key elements that affect an organization's internal control system.
A)True
B)False
Q4) The agency that requires financial audits of publicly traded companies is the:
A)Financial Accounting Standards Board.
B)Securities and Exchange Commission.
C)Federal Government.
D)Internal Revenue Service.
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Chapter 7: Cash and Receivables
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Sample Questions
Q1) A company with 5.6 Accounts Receivable turnover means that the company:
A)has a good Accounts Receivable turnover.
B)has a bad Accounts Receivable turnover.
C)needs to tighten its credit terms.
D)cannot be determined from the information provided.
Q2) When using the aging method, the amount calculated to be the uncollectible accounts is always the amount used for the adjusting entry at the end of the period.
A)True
B)False
Q3) An 83-day note issued on November 13, 2014 will mature on:
A)February 2, 2015.
B)February 3, 2015.
C)February 4, 2015.
D)February 5, 2015.
Q4) Cash consists of anything that a bank will take as a deposit. A)True B)False
Q5) Online banking should NOT be used to reconcile the bank account. A)True B)False
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Chapter 8: Long-Term and Other Assets
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Sample Questions
Q1) When calculating depletion, what is the proper treatment of residual value?
A)There is no residual value in the calculation of depletion expense.
B)The residual value is subtracted from cost to determine the depletable base.
C)The residual value is added to cost to determine the depletable base.
D)Residual value is ignored until the end of the asset's life at which time it is used to limit the final year's expense amount.
Q2) The first step in recording a disposal transaction is to figure the gain or loss on the disposal.
A)True
B)False
Q3) For which of the following securities are any increases or decreases in value reported as a separate change in Stockholders' Equity for the period?
A)Trading securities
B)Available-for sale securities
C)Held-to-maturity securities
D)Trading and held-to-maturity securities
Q4) Incorrectly capitalizing an expense results in net income being overstated.
A)True
B)False
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Chapter 9: Current Liabilities and Long-Term Debt
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Sample Questions
Q1) A contingent liability arises because of a past event, but is dependent upon a future event.
A)True
B)False
Q2) Bonds payable minus the Discount on bonds payable yields the:
A)maturity value.
B)annual interest.
C)carrying amount.
D)principle amount.
Q3) Why are contingent liabilities considered unique and different from all other liabilities?
A)Whether or not a company has an obligation depends on the result of a future event.
B)Whether or not a company has an obligation depends on the result of a past event.
C)The company knows the amount of the obligation.
D)Both B and C are unique to contingent liabilities.
Q4) Accounts Payable is generally listed first under long-term debt.
A)True
B)False
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11
Chapter 10: Corporations: Paid-In Capital and Retained Earnings
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Sample Questions
Q1) 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.
Q2) What are dividends in arrears?
A)The portion of Stockholders' Equity that cannot be used to pay dividends
B)A distribution of a corporation's own stock to its shareholders
C)The portion of an annual dividend on cumulative preferred stock which has not been paid
D)An increase in the number of outstanding shares of stock
Q3) On the date of record:
A)debit Dividends and credit Retained Earnings.
B)debit Dividends Payable and credit Cash.
C)no entry is required.
D)debit Retained Earnings and credit Dividends Payable.
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) In the direct method, each line of the Income Statement is converted from the accrual basis to cash basis.
A)True B)False
Q2) Cash payments for inventory are computed as- Total inventory purchased plus a decrease in Accounts Payable OR minus an increase in Accounts Payable.
A)True B)False
Q3) The cash conversion cycle depends upon the time it takes to sell merchandise inventory, to collect receivables and to pay payables.
A)True B)False
Q4) An example of a cash outflow from investing activities is:
A)payment on bonds payable.
B)making a loan to another company.
C)paying cash dividends.
D)the purchase of treasury stock.
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13
Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) Return on equity measures the relationship between net income and average total assets.
A)True
B)False
Q2) If Crane Legal Supply's net sales increased from $42,000 to $84,000 and its operating expenses increased from $28,000 to $49,000, the vertical analysis based on net sales would show the following for operating expenses for the two periods: (Round your final answer to the nearest percentage.)
A)67% and 58%.
B)58% and 67%.
C)150% and 171%.
D)171% and 150%.
Q3) When an analyst compares a business with a similar business it is referred to as: A)comparative analysis.
B)mentoring.
C)benchmarking.
D)idolizing.
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Page 14