Financial Reporting I Question
Bank
Course Introduction
Financial Reporting I introduces the fundamental principles and standards of financial accounting as applied to external financial reporting. The course covers the conceptual framework of accounting, the accounting cycle, and the preparation and presentation of key financial statements, including the balance sheet, income statement, and statement of cash flows. Emphasis is placed on understanding the recognition, measurement, and disclosure of assets, liabilities, and equity, as well as the relevance and reliability of financial information for decision-making by users such as investors, creditors, and regulatory agencies. Ethical considerations and regulatory environments, including an introduction to International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP), are also explored.
Recommended Textbook
Financial Accounting 1st Canadian Edition by Jeffrey Waybright
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Page 2
Chapter 1: Business, Accounting, and You
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Sample Questions
Q1) Items such as revenue, expenses, and dividends are classified in the accounting equation as __________.
Answer: shareholders' equity
Q2) The Flower Company's beginning retained earnings are $31,000; sales are $46,800; expenses are $43,500 and dividends paid are $2,800. Calculate the ending retained earnings.
Answer: 11ea4bf1_a91f_8cb5_a578_899d1f1525a9_TB2774_00
Q3) What is the purpose of financial accounting information?
Answer: To help investors, creditors, and others to make decisions
Q4) Shareholders' equity includes retained earnings and common shares. A)True
B)False Answer: True
Q5) Walmart is an example of a corporate merchandising business. A)True
B)False
Answer: True
Q6) Celia buys a new machine for her shop on credit. What effect does this have on the accounting equation?
Answer: Increase liabilities and increase assets.
Page 3
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Chapter 2: Analyzing and Recording Business Transactions
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Sample Questions
Q1) Normal balance refers to the positive increase of an account and identifies the side of the account (Debit or Credit) to which this positive balance is recorded.
A)True
B)False
Answer: True
Q2) Items such as wages and interest that have been incurred, but not yet paid, are called __________.
Answer: accrued liabilities
Q3) The required accounting period for a trial balance is one year.
A)True
B)False
Answer: False
Q4) Which would be best at proving the accounts balance?
Answer: Trial balance
Q5) A trial balance is a list of the accounts and their balances taken from the general journal.
A)True
B)False
Answer: False
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Chapter 3: Adjusting and Closing Entries
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Sample Questions
Q1) Income taxes payable would be an example of a(n) __________.
Answer: accrued expense
Q2) Revenues, expenses, and dividends are called permanent accounts.
A)True
B)False
Answer: False
Q3) Rick Company bought a 2-year insurance policy on August 1 for $150 per month. Prepare the adjusting entry on December 31.
Answer: 11ea4bf1_a926_e019_a578_1f4891669eb5_TB2774_00
Calculation:
August 1 to December 31 is equal to 5 months. 5 months x $150 per month = $750
Q4) The adjusted trial balance proves that:
A) all adjusting entries have been recorded correctly.
B) debit totals equal credit totals.
C) no adjusting entry has been entered twice.
D) the balance of the adjusted trial balance is correct.
E) there are no errors.
Answer: B
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Chapter 4: Ethics, Internal Control, and Cash
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Sample Questions
Q1) The petty cash fund of $500 includes the following activity for the month of March.
Cash $294.00
Delivery Expense $89.00
Postage 55.00
Flowers for a special celebration 25.00
Meals 30.00
Requirements:
1. Prepare general journal entries+ to replenish the petty cash fund.
2. On April 1, the controller gives instructions to decrease the petty cash fund by $50. Make the appropriate journal entry.
Q2) The __________ verifies the amount of the deposit and the total amount posted to the cash account.
Q3) For fraud to occur, three things must exist. Identity the three things.
Q4) In Canada, external auditors must now report to __________.
Q5) An employee who pockets cash received from a customer without recording the transaction is conducting a __________.
Q6) List the four parts of a well-defined internal control system.
Q7) Recording assets that the company does not possess is an example of:
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Chapter 5: Accounting for a Merchandising Business
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Sample Questions
Q1) Gross profit percentage is computed by dividing net sales by cost of goods sold.
A)True
B)False
Q2) A discount offered by a supplier as an inducement for prompt payment of an invoice is called a(n):
Q3) If total assets go down and total liabilities go up, the current ratio:
A) remains the same.
B) decreases.
C) increases.
D) cannot be determined from the information given.
E) is not affected at all by these changes.
Q4) Land is an example of what type of asset?
Q5) Journalize the following transactions using the perpetual inventory method.
Dec. 1 Purchased $2,900 worth of merchandise from Wills on terms 2/10 n/30, FOB shipping point.
Dec. 5 Paid for $200 of shipping charges.
Dec. 9 Returned $400 worth of inventory to Wills.
Dec. 10 Paid the invoice from Wills.
Q6) What type of income statement do most merchandising businesses prepare ?
Q7) On what financial statement does Sales Returns and Allowances appear?
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Chapter 6: Inventory
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Sample Questions
Q1) Manufacturers generally purchase large amounts of products from wholesalers and resell them to retailers.
A)True
B)False
Q2) The last step in using the gross profit method to estimate ending inventory is to:
A) estimate the beginning inventory.
B) estimate the cost of goods sold.
C) calculate the cost of goods available for sale.
D) estimate the ending inventory.
E) calculate net income.
Q3) The amount of cost of goods sold is MOST influenced by the:
A) cost of the items sold.
B) cost of the unsold items.
C) inventory method used.
D) number of items sold.
E) the physical flow of inventory.
Q4) What can a poor or declining inventory turnover tell you?
Q5) Footnotes are used with what concept or principle of accounting?
Q6) What does a manufacturer's goods available for sell represent?
Page 8
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Chapter 7: Sales and Receivables
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Sample Questions
Q1) The business or person that signs the note and promises to pay the required amount is called the payee.
A)True
B)False
Q2) Which is NOT a benefit to extending credit to customers?
A) Bad debt expenses
B) Increased revenues
C) Increased profits
D) Wider range of customers
E) Additional customers
Q3) Another name for the quick ratio is the acid-test ratio.
A)True
B)False
Q4) A company with a quick ratio of 1.23 means that the company:
A) has $1.00 in quick assets for every $1.23 in current liabilities.
B) has $1.23 in quick assets for every $1.00 in current liabilities.
C) could not pay off all of its current liabilities using quick assets.
D) would have to use inventory to help pay off its current liabilities.
E) has $1.23 in current assets for every $1.00 in current liabilities.
Q5) A company has a quick ratio of 1.23. What does this mean?
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Chapter 8: Long-Term Assets
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Sample Questions
Q1) Buildings, vehicles, and desks are:
A) amortized.
B) depleted.
C) depreciated.
D) expensed.
E) written off.
Q2) Timber, coal, and other minerals are long-term assets called natural resources.
A)True
B)False
Q3) How often should goodwill be tested for impairment under IFRS?
Q4) The process of allocating the cost of intangible assets to expense is called amortization.
A)True
B)False
Q5) Ryan Corporation made a basket purchase of three items. Item A was appraised at $35,000; item B was appraised at $55,000; and item C was appraised at $60,000. The purchase price was $125,000. At what amount should item B be recorded?
Q6) If an asset is discarded and scrapped for $0 when it has a net book value of $2,000, what is the gain or loss from this disposal?
Page 10
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Chapter 9: Current Liabilities and Long-Term Debt
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Sample Questions
Q1) Journalize the following bond issues:
June 12 Issued $500,000 at 98.
June 18 Issued $250,000 at 106.
June 22 Issued $350,000 at 100.
Q2) The percentage of total assets of a company that it would take to pay off all of the company's liabilities is called the debt ratio.
A)True
B)False
Q3) A $10,000 bond issue with a stated rate of interest of 7%, when the market rate of interest is 8%, means that the bond will be sold for:
A) $10,000.
B) $10,800.
C) less than $10,000.
D) the maturity value.
E) $10,700.
Q4) Tim Hortons is a public company and prepares its financial statements in accordance to IFRS. The company has a contingent liability estimated at $232,000. The likelihood of the obligation occurring is remote or < 5%. What is the appropriate accounting treatment for the company?
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Chapter 10: Corporations: Share Capital and Retained Earnings
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Sample Questions
Q1) NDP Co. issues 750 preferred shares for $10 per share and 1,000 common shares for $15 per share. Identify the entry that would be recorded.
Q2) The liability "dividend payable" is recognized on the date of __________.
Q3) Can a creditor make a claim against an individual shareholder for liabilities associated with a corporation? Explain.
Q4) What journal entry is recorded on the date of payment?
Q5) Identify the advantages and disadvantages of the corporate form of business.
Q6) Preferred shares are considered a voting "class" of shares. A)True B)False
Q7) Identify the three reasons companies issue stock dividends.
Q8) What journal entry is recorded on the date of declaration to avoid a year-end closing entry of the dividends account?
Q9) What two statements are companies required to prepare under IFRS?
Q10) A corporation in Canada can only incorporate through the federal government. A)True B)False Page 12
Q11) Describe the two sources of shareholders' equity.
Q12) On which Statement is Accumulated Other Comprehensive Income reported?
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Chapter 11: The Cash Flow Statement
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Sample Questions
Q1) Which of the following is NOT a part of operating activities?
A) Paying dividends
B) Paying payables
C) Earnings revenue
D) Paying utilities
E) Depreciation expense
Q2) In the direct method of preparing a cash flow statement, interest received and interest expense are in the __________ activities section.
Q3) Why is the operating activities section of the direct method cash flow statement just a cash-basis income statement?
Q4) Which would NOT be subtracted from net income in the operating section of an indirect cash flow statement?
A) An increase in prepaid expenses
B) An increase in accounts payable
C) A decrease in accounts payable
D) An increase in notes receivable
E) An decrease in inventory
Q5) Under the direct method, the only section that differs from the indirect method is the __________ activities section.
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) Merchandise inventory turnover measures the relationship between __________ and __________.
Q2) Which of the ratios helps to evaluate how well a company is earning profit for the common shareholders?
Q3) A company with an accounts receivable turnover of four means that the company collects its receivables approximately every __________ days.
Q4) Assume that Jeanie Industries' inventory was $20,000 in 2012 and $19,000 in 2011 and cost of goods sold for 2012 was $585,000. In addition, assume that account receivables were $30,000 in 2012 and $20,000 in 2011 and credit sales were $750,000. Based on that information and an accounts payable turnover rate of 25, calculate the inventory turnover rate, accounts receivable turnover rate and the cash conversion cycle for Jeanie Industries.
Q5) If total assets are $6,000, what is the common-size figure of cash, assuming that cash has a balance of $2,400?
Q6) Working capital is defined as total assets divided by total liabilities. A)True B)False
Q7) What would an acid test (quick ratio) of 0.75 indicate?
Page 15
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