Financial Reporting
Exam Materials
Course Introduction
Financial Reporting is a comprehensive course that covers the principles, standards, and processes involved in preparing and presenting financial statements for external stakeholders. Students will explore topics such as accounting frameworks, recognition and measurement of income, assets, and liabilities, and the disclosure requirements under International Financial Reporting Standards (IFRS) and generally accepted accounting principles (GAAP). The course emphasizes the interpretation and analysis of balance sheets, income statements, statements of cash flows, and equity statements, equipping students with the skills to evaluate an organization's financial position and performance. Through case studies and practical exercises, learners develop a strong foundation for roles in accounting, auditing, and financial analysis.
Recommended Textbook
Financial Accounting A Business Process Approach 3rd Edition by Jane L. Reimers
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11 Chapters
2570 Verified Questions
2570 Flashcards
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Page 2
Chapter 1: Business: Whats It All About
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Sample Questions
Q1) Which of the following is true about a sole proprietorship?
A)A sole proprietorship is a company owned by two or more individuals.
B)The owner's liability is limited to the amounts invested in the business.
C)Income from a sole proprietorship is distributed to the owner in the form of a dividend.
D)The income from a sole proprietorship is taxed on the owner's personal income tax return.
Answer: D
Q2) The four types of business are ________.
A)service,wholesale,retail,and financial
B)for profit,nonprofit,wholesale,and retail
C)service,merchandising,manufacturing,and financial services
D)financial,manufacturing,service,and wholesale
Answer: C
Q3) A business in the form of a sole proprietorship ________.
A)is separate and distinct from its owner
B)is a separate legal entity
C)files its own tax return
D)is a company with a single owner
Answer: D
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Page 3
Chapter 2: Qualities of Accounting Information
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174 Flashcards
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Sample Questions
Q1) Which of the following statements is TRUE?
A)The IASB is the current standards setting body for the U.S.accounting profession.
B)The FASB determines U.S.generally accepted accounting principles.
C)Applying IFRS will require much less judgment and interpretation than following U.S.GAAP.
D)The IRS determines generally accepted accounting principles.
Answer: B
Q2) Accrual accounting is an accounting system in which the measurement of income is based on cash receipts and cash disbursements.
A)True
B)False
Answer: False
Q3) Financial statements should be prepared using accrual accounting. A)True
B)False
Answer: True
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Chapter 3: Accruals and Deferrals: Timing Is
Everything in Accounting
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Sample Questions
Q1) The total payroll is $4,000 per day of work.If the accounting period ends on Friday of a given week,what entry must be made to the company's accounting records?
A)Decrease Cash by $20,000 and decrease shareholders' equity by recognizing Salaries expense for the same amount.
B)Increase Salaries payable by $20,000 and decrease shareholders' equity by recognizing Salaries expense for the same amount.
C)Increase Salaries payable by $20,000 and increase shareholders' equity by recognizing Salaries expense for the same amount.
D)Decrease Cash by $4,000 and decrease shareholders' equity by recognizing Salaries expense for the same amount.
Answer: A
Q2) Which of the following risks is NOT associated with financial information?
A)errors in recording and updating the financial accounting information
B)unauthorized access to the financial accounting records
C)loss of the data in the financial accounting records
D)loss of product quality
Answer: D
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Page 5
Chapter 4: Payment for Goods and Services: Cash and Accounts Receivable
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Sample Questions
Q1) Goldilocks is the bookkeeper for Three Bears Company.She prepared the company's bank reconciliation at the end of the year and found only two reconciling items: deposits in transit of $2,850 and outstanding checks of $3,500.She then made an adjusting entry to decrease the company's cash balance for the deposits in transit and increase the company's cash balance for the outstanding checks.Now the company's cash balance is exactly the same as the bank statement balance.As a result of the adjusting entry,the cash shown on Three Bears Company's year-end balance sheet will be ________.
A)too high
B)too low
C)just right
D)The answer cannot be determined from the information given.
Q2) Discuss how the segregation of duties serves as a major control for safeguarding cash.
Q3) The Allowance for uncollectible accounts appears on the balance sheet.
A)True
B)False
Q4) Bad debts expense decreases net income.
A)True
B)False
Page 6
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Chapter 5: The Purchase and Sale of Inventory
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Sample Questions
Q1) On February 12,Horseshoe Bend Company purchases $25,000 of merchandise from a vendor with credit terms of 2/10,n/30.On February 15,Horseshoe Bend Company returns
$5,000 of the goods because they are defective.If Horseshoe Bend pays the vendor the full amount due on February 20,the amount of the payment is ________.
A)$25,000
B)$20,000
C)$19,600
D)$18,000
Q2) The periodic inventory method is a method of record keeping that ________.
A)maintains a constant record of the inventory balance
B)updates the inventory records only when a sale is made
C)can be used only in a computerized accounting system
D)involves calculating cost of goods sold only at the end of the period
Q3) Which of the following costs should be included in the inventory account when inventory is purchased FOB shipping point?
A)insurance while the merchandise is in transit
B)the cost of the warehouse
C)the advertising costs
D)the cost of merchandise returned
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Page 7
Chapter 6: Acquisition and Use of Long-Term Assets
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Sample Questions
Q1) KUI Company owns a copyright with an estimated 10-year useful life,a zero salvage value,and an historical cost of $20,000.What is the effect on net income of making the proper adjusting entry at year-end?
A)The adjustment will decrease net income by $20,000.
B)The adjustment will increase net income by $2,000.
C)The adjustment will decrease net income by $2,000.
D)The adjustment will have no affect on net income,but it will reduce net operating cash flows by $2,000.
Q2) How do financial analysts evaluate how well a business uses its assets?
Q3) On January 1,2011,Ace Electronics paid $400,000 cash for a computer that would be used to store and process its accounting information.The computer has a 5-year useful life,after which it will be worthless because it will be obsolete.Ace Electronics uses the straight-line method to depreciate its assets.The book value of the computer at December 31,2012 is ________.
A)$400,000
B)$320,000
C)$240,000
D)$160,000
Q4) Discuss risks and controls associated with long-term assets.
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Chapter 7: Accounting for Liabilities
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Sample Questions
Q1) A bond is ________.
A)debt sold to investors
B)long-term debt until the year it matures
C)an agreement,which requires a company to repay principal plus interest
D)all of these
Q2) When a bond sells for 100,the bond is selling at ________.
A)a discount
B)a premium
C)par
D)the stated rate
Q3) On January 1,2011,Alpha Company issued $1,000,000 of 5%,20-year bonds to buy a new computerized accounting system.The market rate of interest was 6%.The bonds pay interest annually on December 31.To calculate the amount of cash that Alpha received,you must use a discount rate of ________.
A)20%
B)6%
C)5%
D)The answer cannot be determined from the information given.
Q4) What are definitely determinable liabilities and estimated liabilities?
Q5) Explain the difference between a bond discount and a bond premium.
Page 9
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Chapter 8: Accounting for Shareholders Equity
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Sample Questions
Q1) The owners of common stock do NOT have the specific right to ________.
A)vote for members of the board of directors
B)share in the corporation's earnings
C)share in any assets left when a company declares bankruptcy
D)receive dividends before preferred shareholders
Q2) The management of Krupt,Inc.issued two shares of $0.50 par value common stock in exchange for each share of all common shareholder's $1.00 par value stock.What effect will this have on total shareholders' equity? What is this practice called? Is this ethical?
Q3) Team Shirts repurchased $3,700 worth of its stock via the stock market.This purchase
A)increased assets
B)decreased total shareholders' equity
C)increased retained earnings
D)decreased retained earnings
Q4) Retained earnings is also known as paid-in capital.
A)True
B)False
Q5) Explain the difference between authorized,issued,treasury and outstanding stock.
Q6) Why do corporations purchase and own treasury stock?
Page 10
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Chapter 9: Preparing and Analyzing the Statement of Cash Flows
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Sample Questions
Q1) Why is evaluating a company's cash flow important for analysts?
Q2) On January 1,2011,Company Z had accounts receivable of $4,000.During the year,Company Z sold $100,000 of merchandise to credit customers.At December 31,2011,Company Z had accounts receivable of $5,000.How much cash did the company collect from credit customers during the year?
A)$105,000
B)$101,000
C)$99,000
D)$95,000
Q3) Cash paid for interest is a financing activity.
A)True
B)False
Q4) A source of cash from operating activities is ________.
A)proceeds from a loan
B)collection of an account receivable
C)cash received from the sale of used equipment
D)cash received from the sale of treasury stock
Q5) The beginning balance in accounts payable was $4,365.The ending balance was $2,995.How is the accounting information for these items reported on the statement of cash flows using the indirect method?
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Chapter 10: Using Financial Statement Analysis to Evaluate
Firm Performance
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Sample Questions
Q1) A technique for using information from financial statements to formulate specific values to determine some measure of a company's financial position is called ________ analysis.
A)horizontal
B)vertical
C)time-series D)ratio
Q2) A loss from a plane crash could be classified as an extraordinary item by an airline. A)True B)False
Q3) The notes to the financial statements are the last place to look for additional information whenever an analysis reveals something interesting or suspicious. A)True
B)False
Q4) Why must discontinued operations and extraordinary items be reported separately from income from operations on the income statement?
Q5) What is vertical analysis?
Q6) What is horizontal analysis?
Page 12
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Chapter 11: Quality of Earnings, corporate Governance, and Ifrs
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Sample Questions
Q1) An indication of good corporate governance ________.
A)is a board of directors with highly qualified directors who are independent of the management team
B)is a set of financial statements that are transparent
C)is the hiring of independent external auditors who will stand up to the executives on any given accounting issue
D)all of these
Q2) Tim's Tams has been using LIFO to value its inventory because it gives a higher cost of goods sold,lower income,and lower taxes.This year Tim's Tams has decided to make a permanent switch to FIFO,even though it will then have to pay more taxes on its higher reported income.This accounting choice would be considered ________.
A)conservative
B)fundamental
C)basic
D)aggressive
Q3) Higher than usual expenses may indicate a company is manipulating earnings using big bath charges.
A)True
B)False
Page 13
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