Fundamentals of Financial Accounting Exam Materials
Course Introduction
Fundamentals of Financial Accounting introduces students to the basic principles and concepts of accounting used by organizations to record, summarize, and report financial information. The course covers the accounting cycle, preparation of financial statements, and the analysis and interpretation of financial data. Students learn how to measure business transactions, understand the role of accounting in decision-making, and apply Generally Accepted Accounting Principles (GAAP) to real-world business scenarios. Emphasis is placed on the practical application of accounting knowledge for users of financial information, including managers, investors, and creditors.
Recommended Textbook
Financial And Managerial Accounting Principles International Edition 9th Edition by Crosson
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29 Chapters
4463 Verified Questions
4463 Flashcards
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Chapter 1: Uses of Accounting Information and the Financial Statements
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) In which form of business does CVS operate? List two places where this is revealed in the financial statements.
Answer: CVS operates as a corporate form of business.This is evidenced in several places in the financial statements: The title of each statement shows the name of the company as CVS Corporation. The shareholders' equity section of the consolidated balance sheets contains accounts for stock and retained earnings transactions. The consolidated statements of earnings contain a line for income taxes.Corporations are subject to income taxes.
The consolidated statements of cash flows and consolidated statements of stockholders' equity both show stock transactions.
Q2) Corporate governance is the oversight of a company's management performance and ethics by its board of directors.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Analyzing Business Transactions
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Sample Questions
Q1) A purchase is recognized in the accounting records when
A) payment is made for the item purchased.
B) the purchase requisition is sent to the purchasing department.
C) title transfers from the seller to the buyer.
D) the buyer receives the seller's bill.
Answer: C
Q2) Accounts Receivable and Accounts Payable are used when there is a time delay between a transaction and its related cash flow.
A)True
B)False
Answer: True
Q3) For which of the following accounts would a related Accumulated Depreciation account be recorded?
A) Office Equipment
B) Land
C) Office Supplies
D) Prepaid Rent
Answer: A
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Chapter 3: Measuring Business Income
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Sample Questions
Q1) Which of the following accounts is not found in closing entries?
A) Dividends
B) Income Summary
C) Retained Earnings
D) Accumulated Depreciation-Equipment
Answer: D
Q2) Which of the following accounts might appear in the adjusted trial balance but not in the post-closing trial balance?
A) Depreciation Expense-Building
B) Retained Earnings
C) Unearned Revenue
D) Income Summary
Answer: A
Q3) The going concern assumption is not applied to
A) companies that have sustained losses for the previous two years.
B) companies about to file for bankruptcy.
C) the partnership form of business.
D) companies that have been in existence for less than a year.
Answer: B
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Page 5
Chapter 3: Supplement - Closing Entries and the Work Sheet
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Sample Questions
Q1) The heading of a work sheet might include the line "As of December 31,20xx."
A)True
B)False
Q2) When a company has suffered a net loss,the net loss amount is entered on the work sheet on the
A) credit side of the Income Statement columns and the debit side of the Balance Sheet columns.
B) debit side of both the Income Statement and the Balance Sheet columns.
C) credit side of both the Income Statement and the Balance Sheet columns.
D) debit side of the Income Statement columns and the credit side of the Balance Sheet columns.
Q3) A work sheet is more useful for a small company than for a large one.
A)True
B)False
Q4) Which account that does not appear on the balance sheet has an amount in the Balance Sheet columns of a work sheet?
A) Dividends
B) Depreciation Expense
C) Retained Earnings
D) Accumulated Depreciation-Equipment
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Chapter 4: Financial Reporting and Analysis
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Sample Questions
Q1) Which of the following is not a measure of profitability?
A) Current ratio
B) Return on assets
C) Return on equity
D) Debt to equity ratio
Q2) The two parts of a corporation's stockholders' equity section are contributed capital and retained earnings.
A)True
B)False
Q3) The main difference among the balance sheets of the sole proprietorship,the partnership,and the corporation is found in the owners' equity section.
A)True
B)False
Q4) Financial statements are generally prepared for a limited number of users.
A)True
B)False
Q5) Both return on assets and working capital are profitability measures.
A)True
B)False
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Chapter 5: The Operating Cycle and Merchandising Operations
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Sample Questions
Q1) Use this information to answer the following question. Chupka Company experienced the following events during the period:
1. A tabulation of invoices at the end of the day showed \( \$ 800 \) in MasterCard invoices, which were deposited in a bank account at full value less a 5 percent discount.
2. Made a sale on American Express card for \( \$ 400 \) and mailed invoice to American Express for payment. The discount charged by American Express is 4 percent. The entry to record transaction 1 would include an increase in
A) Credit Card Expense for $40.
B) Sales for $760.
C) Cash for $800.
D) Accounts Receivable for $760.
Q2) It is unlikely that a company would want to bond its employees who handle cash or inventory.
A)True
B)False
Q3) Why is the separation of duties an important control activity in a good system of internal control?
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Chapter 6: Inventories
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Sample Questions
Q1) When the average-cost method is applied to a perpetual inventory system,the sale and purchase of goods will change the unit cost of the goods that remain in inventory.
A)True
B)False
Q2) In accounting for inventory,the assumed cost flow need not match the physical goods flow.
A)True B)False
Q3) Average inventory equals $100,000,and cost of goods sold equals $216,000.Days' inventory on hand equals
A) 168.98 days.
B) 170.0 days.
C) 157.9 days. D) 193.1 days.
Q4) In periods of falling prices,LIFO will result in a higher ending inventory valuation than FIFO.
A)True B)False
Q5) What is the chief objective of supply-chain management? How is it accomplished?
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Chapter 7: Cash and Receivables
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Sample Questions
Q1) Cash equivalents are categorized as short-term investments on the balance sheet.
A)True
B)False
Q2) Automated teller machines (ATMs)are used primarily by businesses rather than by consumers.
A)True
B)False
Q3) Using the percentage of net sales method,uncollectible accounts expense for the year is estimated to be $54,000.If the balance of the Allowance for Uncollectible Accounts is an $18,000 credit before adjustment,what is the balance after adjustment?
A) $72,000
B) $38,000
C) $54,000
D) $18,000
Q4) When an account receivable that was previously written off is collected,it is necessary to reverse the entry for the write-off before recording the collection.
A)True
B)False
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Chapter 8: Current Liabilities and Fair Value Accounting
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Sample Questions
Q1) Use this information to answer the following question. \(\begin{array}{lrlr}
\text { Gross payroll } & \$ 16,000 & \text { Federal income taxes withheld } & \$ 1,800 \\
\text { Social security and Medicare rate } & 7.65 \% & \text { Federal unemployment tax rate } & .8 \%\\
\text { State unemployment tax rate}&5.4\%
\end{array}\)
Payroll Taxes and Benefits Expense would be recorded for
A) $1,224.
B) $2,216.
C) $4,016.
D) $992.
Q2) The owner of an amusement park is considering installing a new ride.The ride would cost $10,000,produce a net cash flow of $1,250 annually,and last for nine years.
a. Assuming an interest rate of 10 percent, what is the present value of the net cash flows expected from the ride? Use future value and/or present value tables in calculating your answer. Round amounts to the nearest dollar.
b. Should the ride be purchased?
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Chapter 9: Long Term Assets
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Sample Questions
Q1) Equipment is purchased for $120,000.It has a five-year useful life and a $20,000 residual value.Under the double-declining-balance method,what is the depreciation expense for year 3?
A) $17,280
B) $15,360
C) $14,400
D) $12,800
Q2) According to generally accepted accounting principles,most expenditures for intangible assets acquired from others should be treated as revenue expenditures when incurred.
A)True
B)False
Q3) Which of the following items is not classified as a natural resource?
A) Timberland
B) A gas reserve
C) An oil well
D) Goodwill
Q4) The exclusive right to sell a computer program is called a copyright.
A)True
B)False
Page 12
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Chapter 10: Long-Term Liabilities
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Sample Questions
Q1) Under a capital lease,the lessor,not the lessee,should record depreciation.
A)True
B)False
Q2) If the market interest rate is higher than the face interest rate at the date of issuance,bonds will
A) not sell until the face interest rate is adjusted.
B) sell at face value.
C) sell at a discount.
D) sell at a premium.
Q3) On January 1,2010,Woodvale Corporation issued five-year term bonds with a face value of $700,000.Interest is payable annually on December 31.The bonds were issued for $727,300.The effective interest method of amortization is used.Ryan reported Bond Interest Expense of $65,457 on its income statement for the year ended December 31,2010.Calculate the effective interest rate for these bonds.
Q4) Whether a bond is sold at a discount or a premium,its carrying value will equal its face value on the maturity date.
A)True
B)False
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Page 13
Chapter 11: Contributed Capital
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Sample Questions
Q1) A corporation has 10,000 shares of 8 percent cumulative preferred stock and 20,000 shares of common stock outstanding.Par value for each is $100.No dividends were paid last year,but this year a $200,000 dividend is paid.How much of this $200,000 goes to the holders of common stock?
A) $40,000
B) $80,000
C) $160,000
D) $180,000
Q2) Issuing common and preferred stock generally has been popular among corporations.However,some companies have bought back their common stock.For example,because its stock had declined under the uncertainty of possible health care reforms,Bristol-Myers Squibb bought 25 million of its own shares.Other companies have been awash in cash because of the decline in interest rates,layoffs to cut costs,and decreased need to make new investments.Quaker Oats purchased 4.8 million of its own shares for $323 million and plans to purchase 5 million more.The Quaker Oats treasurer was quoted as saying,"We spend on new products,we make acquisitions,we raise the dividend,and we still can't soak up the cash." Sun Microsystems cut its outstanding shares by 9 percent with an aggressive buyback program,and PepsiCo purchased 50 million shares at a cost of $1.8 billion.For what reasons would a company buy back its own shares?
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Page 14
Chapter 12: Investments
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Sample Questions
Q1) The cost-adjusted-to-market method of accounting for investments is used when the investment is
A) controlling.
B) influential and noncontrolling.
C) noninfluential and controlling.
D) noninfluential and noncontrolling.
Q2) Available-for-sale securities may be classified as either short- or long-term,depending on how long management intends to keep them.
A)True
B)False
Q3) Detailed information about a company's investments is appropriately disclosed in the notes to the financial statements.
A)True
B)False
Q4) Although the preparation of a consolidated balance sheet requires elimination entries,a consolidated income statement may always be prepared without any elimination entries.
A)True B)False
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Chapter 13: The Corporate Income Statement and the Statement of Stockholders Equity
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Sample Questions
Q1) The quality of a company's earnings may be affected by the A) industry in which the company operates.
B) choice of independent auditors.
C) accounting methods the company uses.
D) countries in which the company operates.
Q2) How is it possible for a company to show a net income for a given year yet be in a deficit position at year end?
Q3) A corporation should account for the declaration of a 10 percent stock dividend by
A) transferring from retained earnings to contributed capital an amount equal to the legal capital represented by the dividend shares.
B) transferring from retained earnings to contributed capital an amount equal to the market value of the dividend shares.
C) transferring from retained earnings to contributed capital whatever amount the board of directors deems appropriate.
D) making only a memorandum entry in the general journal.
Q4) Why would a financial analyst consider the amount of income from continuing operations to be more useful than the amount of net income?
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Chapter 14: The Statement of Cash Flows
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Sample Questions
Q1) During 2010,Heckart Corporation had sales of $250,000,net income of $25,000,average total assets of $350,000,dividend payments of $17,500,net cash flows from operating activities of $26,000,purchases of plant assets of $37,500,and sales of plant assets of $45,000.Cash flows to assets equals (Round amounts to one decimal place)
A) 13.0 percent.
B) 10.4 percent.
C) 8.7 percent.
D) 7.4 percent.
Q2) A schedule of noncash investing and financing activities is not required when a statement of cash flows is prepared using the indirect method.
A)True
B)False
Q3) If the indirect method is used,each of the following is a proper adjustment to net income to arrive at net cash flows from operating activities except A) deducting a decrease in Prepaid Expenses.
B) adding an increase in Salaries Payable.
C) deducting an increase in Accounts Receivable.
D) adding a decrease in Inventory.
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Page 17
Chapter 15: The Changing Business Environment - a Managers Perspective
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Sample Questions
Q1) If a management accountant gives information about a future merger of his or her company to a relative,the accountant has acted unethically.
A)True
B)False
Q2) Which of the following would be used to measure the performance of a segment in a profit-generating company?
A) Nonfinancial performance measures
B) Financial performance measures
C) Both financial and nonfinancial measures
D) Neither financial nor nonfinancial measures
Q3) Total quality management has many of the same characteristics as the JIT philosophy.
A)True
B)False
Q4) Internal accounting reports should be prepared when they are needed,without regard to calendar dates or regularity of issue.
A)True
B)False
Page 18
Q5) Give two examples of nonfinancial performance measures.
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Chapter 16: Cost Concepts and Cost Allocation
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Sample Questions
Q1) Use the information below for the year ended December 31,20xx,to prepare the statement of cost of goods manufactured.
\(\begin{array}{|lrr|}
\hline \text { Inventories } & \text { Beginning } & \text { Ending } \\
\text { Materials inventory } & \$ 41,000 & \$ 51,000 \\
\text { Work in process inventory } & 62,000 & 78,000 \\
\text { Direct materials purchased } & & 258,000 \\
\text { Total direct labor costs } & & 372,000 \\
\text { Total indirect labor costs } && 67,000 \\
\text { Utilities } & & 41,000 \\
\text { Depreciation } & & 54,000 \\
\text { Small tools } && 5,000 \\
\text { Factory insurance } && 3,000 \\
\text { Factory supervision } && 66,000 \\
\text { Miscellaneous overhead costs } && 11,000\\
\hline
\end{array}\)
Q2) Both product costs and period costs could appear on the income statement. A)True
B)False
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Chapter 17: Costing Systems- Job Order Costing
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Sample Questions
Q1) Service organizations incur little or no cost for A) applied overhead.
B) actual overhead.
C) materials.
D) labor.
Q2) Job order costing is used by companies that make large or unique products.
A)True
B)False
Q3) Teddy's To Hug,produces Teddy Bears for heart patients.Last month the company produced 5,000 bears.Using job order costing,determine the product unit cost for one bear based on the following costs: production facility utilities,$600; depreciation on production equipment,$550; indirect materials,$450; direct materials,$1,300; indirect labor,$900; direct labor,$2,500; sales commissions,$3,000; president's salary,$5,000; insurance on production facility,$700; advertising expense,$600; rent on production facility,$5,000; rent on sales office,$3,000; and legal expense,$300.Carry your answer to two decimal places.
Q4) Explain the similarities and differences between job order costing and process costing.Focus on the characteristics of each type of system.
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Page 20
Chapter 18: Costing Systems- Process Costing
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Sample Questions
Q1) Under the FIFO cost flow assumption,separate unit cost analyses are not used for each accounting period because costs of different periods are averaged.
A)True
B)False
Q2) Average costing method disregards the previous period cost of units started last period.
A)True
B)False
Q3) If 45,000 units of ending work in process inventory are 60 percent complete as to conversion costs,27,000 equivalent units of conversion costs must be incurred to complete these units during the next period.
A)True
B)False
Q4) Conversion costs are defined as the combined total of direct materials costs and direct labor costs incurred by a production department.
A)True
B)False
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21
Chapter 19: Value-Based Systems- Abm and Lean
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Sample Questions
Q1) Value-based systems are information systems that provide only customer-related information but not activity-based information.
A)True
B)False
Q2) Many indirect costs in a traditional system become direct costs in a JIT system.
A)True
B)False
Q3) For work done during August,Printing Press Company incurred direct materials costs of $130,000 and conversion costs of $226,000.The company employs a traditional operating philosophy.At the end of August,it was determined that the Work in Process Inventory account had been assigned $1,000 of costs,and the ending balance of the Finished Goods Inventory account was $3,000.There were no beginning inventory balances.How much was cost of goods manufactured during August?
A) $356,000
B) $355,000
C) $353,000
D) $352,000
Q4) How can activity-based systems help managers in a global marketplace?
Q5) How do managers measure an activity's performance?
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Chapter 20: Cost Behavior Analysis
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Sample Questions
Q1) The engineering method of separating costs
A) is generally used to estimate the cost of activities and new products.
B) is sometimes called a time and motion study.
C) is expensive to use because it is so detailed.
D) All of the above are correct.
Q2) Contribution margin equals sales minus A) cost of goods sold.
B) total costs.
C) fixed costs.
D) variable costs.
Q3) The relevant range of activity is the range in which actual operations are likely to occur.
A)True
B)False
Q4) a.What is the formula for breakeven units?
b.How is knowledge of the contribution margin of a product helpful? In your answer,explain two possible benefits of computing the contribution margin of a product.
Q5) Is breakeven analysis a tool that can be used for a service-oriented business?
Explain your answer.
23
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Chapter 21: The Budgeting Process
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Q1) A company seeks to have as much cash as possible on hand.Cash budgeting helps to accomplish this.
A)True
B)False
Q2) Budgeting is the process of identifying,gathering,summarizing,and communicating financial and nonfinancial information about an organization's future activities.
A)True
B)False
Q3) A master budget consists of a set of operating budgets and a set of financial budgets for a specific accounting period.
A)True
B)False
Q4) Projected financial statements are the final product of the budgeting process. A)True
B)False
Q5) The direct labor budget is needed to prepare the production budget.
A)True B)False
Q6) Describe three benefits budgeting provides to an organization's success.
Page 24
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Chapter 22: Performance Management and Evaluation
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Sample Questions
Q1) Using the following information,prepare a traditional income statement and a variable costing income statement:
\(\begin{array}{lr}
\text { Sales } & \$ 4,000,000 \\
\text { Variable cost of goods sold } & 1,800,000 \\
\text { Variable selling expenses } & 900,000 \\
\text { Fixed selling expenses } & 100,000 \\
\text { Fixed manufacturing costs } & 600,000 \\ \end{array}\)
Q2) The effectiveness of a performance management and evaluation system depends on how well it coordinates the goals of
A) the entire company.
B) responsibility centers.
C) managers.
D) all of these choices.
Q3) How many different types of responsibility centers exist?
A) 2
B) 5
C) 10
D) 3
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Chapter 23: Standard Costing and Variance Analysis
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Sample Questions
Q1) A purpose of standard costing is to A) control costs.
B) allocate costs more accurately.
C) replace subjective decision making.
D) compute the breakeven point.
Q2) One drawback of using standard costing is that it is
A) expensive to use.
B) difficult to implement.
C) often inaccurate.
D) not applicable to most manufacturing systems.
Q3) A standard costing system
A) is not typically used by management for cost planning and cost control purposes.
B) is a system in which all costs affecting the three inventory accounts and the Cost of Goods Sold account are stated in terms of actual costs incurred.
C) depends on actual costs rather than planned costs.
D) is employed with an existing job order costing or process costing system and is not a full cost accounting system in itself.
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Chapter 24: Short Run Decision Analysis
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Q1) The idea behind incremental analysis is to review decision data that differ between alternatives; information that is the same for all alternatives is considered irrelevant to the decision process.
A)True
B)False
Q2) Many of the decisions that managers make do not affect their organization's activities in the short run.
A)True
B)False
Q3) During 2010,America,Inc.,produced,among other products,9,300 cameras,incurring the following unit costs: $5 in direct materials,$3 in direct labor,$2 in variable overhead,$4 in fixed overhead,$0.50 in variable selling and administrative expenses,and $1 in fixed selling and administrative expenses.An outsider had offered to produce the cameras for $12 each.Assuming that the factory space would have been idle otherwise,acceptance of the outside offer would have
A) lost the company $9,300.
B) saved the company $33,950.
C) saved the company $18,950.
D) lost the company $13,950.
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Page 27
Chapter 25: Capital Investment Analysis
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Q1) An advantage of the net present value method is that it considers the time value of money.
A)True
B)False
Q2) Automating the existing production process does not come under the purview of capital investment analysis.
A)True
B)False
Q3) Discounting calculates the __________ value of an amount to be received.
A) future B) compounded C) present
D) book
Q4) Ordinary annuity cash flows occur at the beginning of the interest period.
A)True B)False
Q5) Net present value analysis is based on a project's cash flows.
A)True B)False
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Chapter 26: Pricing Decisions, incltarget Costing and Transfer Pricing
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Q1) When a buying division elects to purchase from an outside supplier,
A) the impact on overall company profits is usually not considered in the decision.
B) only fixed costs should be included in the decision analysis.
C) the price from the outside supplier is likely to be more than the incremental cost to the supplying division.
D) overall company profits should be enhanced.
Q2) Use of market transfer prices
A) is the only acceptable approach in a free enterprise economy.
B) usually does not cause the selling division to ignore negotiating attempts by the buying division.
C) may cause an internal shortage of materials.
D) usually does not work against the operating objectives of the company as a whole.
Q3) A negotiated transfer price is often used for internal pricing.
A)True B)False
Q4) Cost and price information are irrelevant to transfer prices. A)True B)False
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Chapter 27: Quality Management and Measurement
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Q1) The following statement appears in the annual report of Ryan,Inc.,for the year ended January 1,2008: "We are confident that our ever-increasing emphasis on customer service will enhance our reputation as the finest retailer in our industry." Identify two nonfinancial measures of good quality and two nonfinancial measures of poor quality Ryan,Inc.,might apply.
Q2) A management information system is not designed to provide data about individual customers.
A)True
B)False
Q3) Though focus on quality is considered a modern management issue,the Deming Application Prize actually originated in 1951.
A)True
B)False
Q4) Quality in manufacturing simply means a product has to be dependable and free of defects.
A)True
B)False
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Chapter 28: Financial Analysis of Performance
Available Study Resources on Quizplus for this Chatper
164 Verified Questions
164 Flashcards
Source URL: https://quizplus.com/quiz/71983
Sample Questions
Q1) Using the income statement below,develop a common-size statement by filling in the blanks provided.Show your work.Round to one decimal place.
\(\begin{array}{|lrr|}
\hline & { \mathbf { 2 0 x \mathbf { x } } } &\mathbf { 2 0 x \mathbf { x } } \\\\
\text { Net sales } & \$ 780,000&\underline{\quad\quad} \\
\text { Cost of goods sold } & 452,400 \\
\text { Gross margin } & \$ 327,600 &\underline{\quad\quad}\\
\text { Operating expenses } & 156,000&\underline{\quad\quad} \\
\text { Income before income taxes } & \$ 171,600 \\
\text { Income taxes expense } & \underline{124,800}&\underline{\quad\quad} \\
\text { Net income } & \$ 46,800&\underline{\quad\quad} \\
\hline
\end{array}\)
Q2) Both diversified companies and conglomerates operate in a single,well-defined industry.
A)True
B)False
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