Financial Accounting
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Course Introduction
Financial Accounting introduces students to the fundamental principles and practices of accounting, focusing on the preparation, interpretation, and analysis of financial statements for external users such as investors, creditors, and regulators. The course covers key topics including the accounting cycle, recognition and measurement of assets and liabilities, revenue recognition, and the use of accounting information for decision-making. Students will develop an understanding of how financial information is recorded, summarized, and reported in accordance with generally accepted accounting principles (GAAP), gaining essential skills for evaluating the financial health and performance of organizations.
Recommended Textbook
Using Financial Accounting Information The Alternative to Debits and Credits 10th Edition by Gary
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2617 Verified Questions
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Chapter 1: Accounting As a Form of Communication
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Sample Questions
Q1) Which one of the following is least likely to be a user of financial information of a grocery store?
A)The manager of the grocery store
B)The supplier of milk to the grocery store
C)A stockbroker looking for a possible investment
D)A customer at the grocery store
Answer: D
Q2) Dimension Inc.had net income for 2017 of $24,000.It declared and paid a $13,000 cash dividend in 2017.If the company's retained earnings for the end of the year was $39,600,what was the company's retained earnings balance at the beginning of 2017?
A)$28,600
B)$50,600
C)$76,600
D)$2,600
Answer: A
Q3) Bondholders are external users of a company's accounting information.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Financial Statements and the Annual Report
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Sample Questions
Q1) If the current ratio is 2.5 to 1,net income is $6,000,and current liabilities are $18,000,how much is working capital?
A)$ 6,000
B)$ 14,000
C)$ 27,000
D)$ 45,000
Answer: C
Q2) Read the information about Crystal,Inc.Has Crystal been profitable since it began operations? How do you know?
Answer: Retained earnings represents the company's cumulative profits since it began operations less the dividends it paid out.Since Crystal,Inc.has a positive balance in its retained earnings account,it has been profitable over the time it has been in business.Cumulative net income exceeds aggregate net loss and aggregate dividends paid.
Q3) One primary purpose of a classified balance sheet is to help users evaluate the liquidity of a company.
A)True
B)False
Answer: True
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Chapter 3: Processing Accounting Information
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Sample Questions
Q1) Which of the following events (transactions)is an internal event for a business entity?
A)An accountant provides services for clients.
B)An accountant purchases computer equipment to maintain business records and prepare legal documents.
C)An accountant receives cash payments from clients for services performed.
D)Periodically,the historical cost of the computer equipment used by an accountant is recorded as depreciation expenses.
Answer: D
Q2) A list of all asset,liability,stockholders' equity,revenue,and expense accounts,along with their assigned account numbers,that are used by a company,is a(n)
A)account.
B)general journal.
C)general ledger.
D)chart of accounts.
Answer: D
Q3) A purchase of raw materials from a supplier is a(n)____________________ event.
Answer: external
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5
Chapter 4: Income Measurement and Accrual Accounting
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Sample Questions
Q1) Refer to the consolidated statements of income for Scenic View Foods Corporation. Required
Identify three specific accounts of Scenic View Foods that might include expenses accrued as a result of adjustments.Discuss the "effects" of these on the accounting equation.Ignore amounts.
Q2) The names of the four major types of adjusting entries are _________________________,_________________________,__________ _______________,and _________________________.
Q3) Every company prepares only four adjustments-one for each of the four types of adjustments. A)True B)False
Q4) Quirin Corp.purchases office supplies once a month and prepares monthly financial statements.The asset account Office Supplies on Hand has a balance of $1,850 on March 1.Purchases of supplies during March amount to $1,500.Supplies on hand at March 31 amount to $1,020.Prepare the necessary adjusting entry on Quirin's books on March 31.What will be the effect on net income for March if this entry is not recorded?
Q5) Temporary accounts are also known as _________________ accounts.
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Chapter 5: Inventories and Cost of Goods Sold
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Sample Questions
Q1) Changing inventory methods to take advantage of the tax breaks offered by LIFO is not a valid justification for a change in methods.
A)True
B)False
Q2) The understatement of ending inventory in one period leads to a(n)__________ of cost of goods sold expense in the same period.
Q3) If cost of goods sold does not equal the cost of merchandise purchased during the period,an adjustment must be made to correct the error.
A)True
B)False
Q4) Under the perpetual inventory system,each time goods are purchased,the Inventory account is transferred to sales revenue.
A)True
B)False
Q5) Refer to the information for Grappa,Inc.
How much of every dollar is gross profit for 2018?
Q6) Accountants define the market value of inventory as its __________.
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Chapter 6: Cash and Internal Control
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Sample Questions
Q1) Why is cash management necessary?
Q2) An internal control system consists of all of the following policies and procedures except those necessary to ensure
A)the safeguarding of an entity's assets.
B)that cash on hand and on deposit in checking accounts is beyond the minimal amount for ongoing operations.
C)the reliability of an entity's accounting records.
D)the accomplishment of an entity's overall objectives.
Q3) What rational is used in order to determine if an amount is "cash"?
Q4) A(n)__________ is a form sent by the seller to the buyer as evidence of a sale.
Q5) The audit committee of the board of directors provides direct contact between the __________ and the __________.
Q6) Which of the following items would be subtracted from the balance per books on a bank reconciliation?
A)Outstanding checks
B)Deposit in transit
C)Service charge assessed by the bank
D)Interest collected by the bank on a customer note
Q7) A(n)__________ is a form sent by the purchasing department to the supplier.
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Chapter 7: Receivables and Investments
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Sample Questions
Q1) The use of the allowance method is an attempt by accountants to match bad debts as an expense with the revenue of the period in which a sale on credit takes place.
A)True
B)False
Q2) A company invests excess cash in a certificate of deposit.At the end of an accounting period before the CD matures,the company will recognize interest expense.
A)True
B)False
Q3) Promissory notes are non-negotiable.
A)True
B)False
Q4) Lewisburg Corp.had sales during the year of $15,000,000 and an average accounts receivable of $5,000,000.Its accounts receivable turnover ratio is 0.33 times. A)True
B)False
Q5) Earl's Company reported its accounts receivable turnover ratio at 10 times.Its credit terms are 2/10,n/20.What does this ratio tell you about Earl's Company?
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Page 9
Chapter 8: Operating Assets: Property, Plant, and Equipment, and Intangibles
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Sample Questions
Q1) Given below are costs incurred by Bunker Company during 2017 and 2018.Bunker follows the policy of decreasing the Intangible Asset account directly as amortized. Research was conducted to discover a new product and costs of $200,000 in 2017 and $80,000 in 2018 were incurred.After several months,a product was created and a patent secured for a cost of $150,000,effective as of July 1,2018.The company expects to have increased revenues of $500,000 over the next several years.The patent is expected to be useful for the next ten years.
A. Prepare a partial income statement for the year ended December \( 31,2018 \).
B. How should the \( \$ 80,000 \) cost incurred in 2018 be reported on the financial statements?
Q2) Which of the following accounts would not be reported in the Property,Plant,and Equipment section of a balance sheet?
A)Accumulated Depreciation-Buildings
B)Buildings
C)Depreciation Expense-Buildings
D)Land
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Page 10
Chapter 9: Current Liabilities, Contingencies, and the Time
Value of Money
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Sample Questions
Q1) In 2017,Baloga Heating Company sold 400 water heaters for $350 each.The water heaters carry a two-year warranty for repairs.Baloga estimates that repair costs will average 2% of the total selling price.How much is recorded in the warranty liability account as a result of selling the water heaters during 2017?
A)$4,200
B)$2,800
C)$1,400
D)No liability should be recorded until the water heaters are brought back for repairs.
Q2) If Shidan has $5,000 to invest and wants to have $10,000 at the end of nine years,what compounded interest rate must she get on her money (assume annual compounding)?
A)5%
B)6%
C)7%
D)8%
Q3) Income taxes payable is a current liability.
A)True
B)False
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Chapter 10: Long-Term Liabilities
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Sample Questions
Q1) Interest expense is computed annually when a bond is issued for other than its face value.For a bond issued at a discount,how will this component change under the effective interest method as the bond approaches maturity?
A)Decrease
B)Increase
C)Remain constant
D)Not enough information given to decide
Q2) With the effective interest method of amortization,the amortization of a bond premium results in
A)an increase in stockholders' equity.
B)no change in stockholders' equity.
C)an increase in interest expense.
D)a decrease in interest expense.
Q3) If Tanner Company becomes less creditworthy,the market price of its bonds will decline.
A)True
B)False
Q4) The denomination or principal amount of the bond is usually referred to as the __________.
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Chapter 11: Stockholders Equity
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Sample Questions
Q1) Which of the following transactions has an effect on the statement of cash flows?
A)The sale of preferred stock
B)The declaration of a cash dividend
C)A small stock dividend
D)A large stock dividend
Q2) Which of the following is true concerning a sole proprietorship?
A)It is a separate legal entity.
B)It may have more than one class of stock outstanding.
C)It is owned by one or more persons.
D)The separate entity concept applies.
Q3) Net income that has been earned by the corporation but not paid out as dividends is called __________.
Q4) Readers of the financial pages of the daily newspaper noticed the following information with regard to the Connor Company stock: Daily high,45.50;Daily low,42.25;Last,43.50;Change,+0.75.This tells readers that the
A)stock was selling at 43.50% of par at the close of the day.
B)stock gained $3.00 in value over the previous day.
C)stock gained $0.75 in value over the previous day.
D)company's stock is a popular investment.
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Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) Tulsa Corp.reported the following information for 2017 and 2018:\(\begin{array}{lr}
\text { Interest payable, December } 31,2017 & \$ 5,700 \\
\text { Interest payable, December 31,2018 } & 6,200 \\
\text { Interest expense-2018 } & 12,250 \end{array}\) How much cash was paid for interest during 2018?
A)$11,750
B)$12,250
C)$12,500
D)$12,750
Q2) Under the indirect method,instead of reporting cash receipts and payments,net income is reconciled with net cash from operating activities.
A)True
B)False
Q3) Cash flow per share is computed by dividing cash on the balance sheet by the number of shares outstanding.
A)True
B)False
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14
Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) The denominator of a return ratio will be some measure of the company's income for the period.
A)True
B)False
Q2) Some ratios are more useful for management,whereas others are better suited to the needs of outsiders,such as stockholders and bankers.What is an example of a ratio that is primarily suited to management use and why? What ratio is more suited to use by outsiders and why?
Q3) Treetop Company paid off a $100,000 two-year note payable.The effect of this transaction is that the
A)earnings per share increased.
B)current ratio decreased.
C)debt-to-equity ratio increased.
D)debt-to-equity ratio decreased.
Q4) If the current ratio is 3 to 1 and the working capital is $100,000,then the current assets are
A)$150,000.
B)$200,000.
C)$300,000.
D)$450,000.
Page 15
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Chapter 14: International Financial Reporting Standards
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Sample Questions
Q1) All of the following statements are true regarding international legal systems except
A)the common law system has its roots in the United Kingdom.
B)in common law countries,there are generally fewer statutes written into the laws.
C)in code law countries,there is more reliance on interpretations by the courts than in common law countries.
D)divergence in accounting standards is linked to differences in legal systems around the world.
Q2) In which of the following countries do significant differences exist between accounting income and taxable income?
A)Japan
B)United States
C)Germany
D)France
Q3) No single explanation can be given for the divergence of accounting standards.
A)True
B)False
Q4) Summarize some of the common differences between U.S.GAAP and IFRS.
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Page 16