Fundamentals of Financial Accounting Final Exam
Course Introduction
Fundamentals of Financial Accounting introduces students to the core principles and practices of financial accounting, emphasizing the preparation, interpretation, and analysis of financial statements. Topics include the accounting cycle, recognition and measurement of assets, liabilities, and equity, and the application of generally accepted accounting principles (GAAP). The course also explores ethical considerations and the role of accounting in business decision-making, providing a foundational understanding necessary for further study in accounting or related fields.
Recommended Textbook
Financial Accounting 4th Canadian Edition by Robert; Libby
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13 Chapters
1686 Verified Questions
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2
Chapter 1: Financial Statements and Business Decisions
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Sample Questions
Q1) A note payable is a borrowing instrument that generally does not involve the payment of interest.
A)True
B)False
Answer: False
Q2) The AcSB is currently the body responsible for establishing accounting standards.
A)True
B)False
Answer: True
Q3) Assets are initially measured and reported on the statement of financial position at their current market value at the date of the statement of financial position.
A)True
B)False
Answer: False
Q4) A partnership is an incorporated entity that has more than one owner.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Investing and Financing Decisions and the Accounting System
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Sample Questions
Q1) Which of the following liability accounts is usually not satisfied by payment of cash?
A)Trade payables.
B)Unearned revenues.
C)Taxes payable.
D)All of the mentioned are satisfied by paying cash.
Answer: B
Q2) Which of the following defines assets?
A)Probable future economic benefits owned by an entity as a result of past transactions.
B)Possible future economic benefits owed by an entity as a result of past transactions.
C)Probable future economic benefits owned by an entity as a result of future transactions.
D)Possible future economic benefits owed by an entity as a result of future transactions.
Answer: A
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Chapter 3: Operating Decisions and the Accounting System
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Sample Questions
Q1) Which of the following businesses would most likely have the shortest operating cycle?
A)A retail chain such as Walmart
B)A jewellery manufacturer such as Mappins
C)A grocery chain such as Loblaws
D)A pizza franchise such as Pizza Pizza
Answer: D
Q2) The periodicity assumption is the basis for which of the following?
A)dividing the activities of a business into a series of time periods for accounting and reporting purposes.
B)the cut-off of revenue recognition only.
C)keeping the company's transactions separate from the owners' transactions.
D)the cut-off of expense recognition only.
Answer: A
Q3) Asset turnover measures
A)how often a company replaces its assets.
B)how efficiently a company uses its assets to generate sales.
C)the portion of the assets that have been financed by creditors.
D)the overall rate of return on assets.
Answer: B
Page 5
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Chapter 4: Adjustments,financial Statements,and the Quality of Earnings
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Sample Questions
Q1) On December 1,20A,Pest Company collected $1,200 in advance for three months of rent on some office space.It was credited in full to unearned rent revenue.Assuming the accounting year ends December 31,give the adjusting entry required on December 31,20A.
Q2) Why is the statement of cash flows important?
A)of the three required financial statements,it is the only one which reports changes which took place during an accounting period.
B)it indicates the asset and liability position of a company by reflecting the amounts and types of its assets and liabilities at the beginning and end of the period.
C)it summarizes the information already reported in the income statement and statement of financial position.
D)it explains the sources and uses of cash during the period.
Q3) At the end of the accounting period,wages earned by employees but not yet recorded nor paid amounted to $400; therefore,the adjusting entry should be: Debit--Wages payable; Credit-- Wages expense.
A)True
B)False
Q4) Is the adjusted trial balance a financial statement? Explain why or why not.
Page 6
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Chapter 5: Communicating and Interpreting Accounting Information
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Sample Questions
Q1) In 2012,The W D Company reported profit of $1.3 billion and cash flow from operations of $5.6 billion.In 2011,it profit was $1.9 billion and cash flow from operations was $5.1 billion.What were their quality of income ratios for 2012 and 2011 respectively?
A).23 and .37
B).91 and 1.46
C)1.10 and .68
D)4.31 and 2.68
Q2) Jackson Company gathered the following data to prepare its 20B statement of cash flows: Based only on the above data,the net cash inflow from operating activities during 20B was which of the following?
A)$43,000.
B)$45,000.
C)$51,000.
D)$53,000.
Q3) Increases in current liabilities are added to profit while decreases in current liabilities are subtracted from profit to derive the net cash flows.
A)True
B)False
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Chapter 6: Reporting and Interpreting Sales Revenue, receivables, and Cash
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Sample Questions
Q1) The users of accounting information are decision makers such as investors,creditors,and analysis experts who provide financial advice.
A)True
B)False
Q2) Which of the following is not commonly classified as a current asset?
A)Trade receivables.
B)Dividends declared.
C)Merchandise inventory.
D)Office supplies inventory.
Q3) Liberward,Inc.,sold and issued 1,000 shares for $15 per share.The book value of the shares was $10 per share.The journal entry to record the share issue would include which of the following?
A)a debit to Cash for $10,000.
B)a credit to Common Shares for $10,000.
C)a credit to Common Shares for $15,000.
D)a credit to Cash for $15,000
Q4) Trade receivables is classified as a noncurrent asset.
A)True
B)False
Page 8
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Chapter 7: Reporting and Interpreting Cost of Goods Sold and Inventory
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Sample Questions
Q1) It is important to record sales returns and allowances in a separate account so management can determine the volume of returns and allowances in order to measure the quality of their products.
A)True
B)False
Q2) If the terms are 3/15,n/45 on a credit sale,the customer will save 3% of the invoice price by paying at least 30 days before the credit period ends.
A)True
B)False
Q3) In order to achieve effective control of cash,it is important that one person assume the jobs for handling cash and accounting for cash.
A)True
B)False
Q4) Why is the reconciliation of a company's cash account to the bank statement so important for effective internal control for cash?
Q5) What are "cash equivalents"? Specifically where would they appear on the financial statements?
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Chapter 8: Reporting and Interpreting Property, plant, and Equipment; Intangibles; and Natural Resources
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Sample Questions
Q1) FIFO yields the same inventory valuation and cost of goods sold amounts under both the periodic and perpetual inventory systems.
A)True
B)False
Q2) House Depot Company hired a new store manager in March 20C,who determined the ending inventory on December 31,20C,to be $20,000.In March,20E the company discovered that the 20C ending inventory should have been $28,000.The December 31,20D,inventory was correct.Ignore income taxes. Complete the following table to show the effects of the inventory error on the four amounts listed.Give the amount of the discrepancy and indicate whether it was overstated (O),understated (U),or had no effect (N).
Q3) A high inventory turnover ratio indicates that minimal funds are tied up in inventory.
A)True
B)False
Q4) A cost flow assumption need not match the physical flow of inventory.
A)True
B)False
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Chapter 9: Reporting and Interpreting Liabilities
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Sample Questions
Q1) A company that is self-constructing a new store,which will open upon completion,is allowed to capitalize the interest during the period of construction if they finance the construction with actual loans.
A)True
B)False
Q2) Helm Corporation purchased a machine with an initial cost of $80,000,a residual value of $5,000,and an estimated useful life of 10 years.At the beginning of the fifth year,Helm spent $10,000 for an extraordinary repair.Following the repair,Helm estimated that the machine had a remaining useful life of 8 years,and that the residual value was unchanged.Calculate depreciation expense on the machine for the fifth year,assuming that Helm uses the straight-line method.
A)$5,625
B)$6,875
C)$7,250
D)$7,500
Q3) Depreciation expense,as computed for financial reporting,has a direct effect on a corporation's cash flow.
A)True
B)False
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Page 11
Chapter 10: Reporting and Interpreting Bond Securities
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Sample Questions
Q1) On the company's 20A year-end statement of financial position,the liability related to this note should be reported as which of the following?
A)A $12,480 long-term liability.
B)A $12,480 current liability.
C)A $12,000 long-term liability.
D)A $12,000 current liability.
Q2) Mild Company borrowed $5,000 on an 8% (annual rate)interest-bearing note payable on March 1,20C.The maturity date of the note (and payment of all interest)is September 1,20D.The accounting period ends December 31.Give the entry for each of the following dates.Assume simple interest.Round to the nearest dollar.
Q3) Interest rates on notes are usually stated as a(n)
A)monthly rate.
B)daily rate.
C)annual rate.
D)semi-annual rate.
Q4) Simple interest is calculated as: Principal x Time.
A)True
B)False
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Page 12
Chapter 11: Reporting and Interpreting Stockholders Equity
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Sample Questions
Q1) Some bonds are issued with a variable rate of interest instead of a fixed rate of interest.
A)True
B)False
Q2) How much would Kristen have to deposit in the bank at the end of each of the next five years if she wishes to have $5,000 in the bank at the end of that time period,assuming she will be earning 6% annual rate of return? (Round to the nearest dollar).
A)$887
B)$943
C)$1,000
D)$1,187
Q3) Bonds sold below par are said to be issued at a discount. A)True
B)False
Q4) The carrying amount of a bond not issued at face value will always move A)towards the face value.
B)away from the face value.
C)upwards.
D)downwards.
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Chapter 12: Statement of Cash Flows
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Sample Questions
Q1) Casey Corporation has the following capital shares outstanding:
(a)Common shares,6,000 shares.
(b)$.80 preferred shares,2,000 shares,cumulative,with 2 years in arrears excluding the current year.
A cash dividend of $6,000 was declared and paid near the end of the current year.
(a)Total dividends received by the preferred shareholders would be $________.
(b)Total dividends received by the common shareholders would be $________.
Q2) Which one of the following events would not require a journal entry on a corporation's books?
A)100% stock dividend
B)2 for 1 stock split
C)2% stock dividend
D)$1 per share cash dividend
Q3) Canadian private enterprises are not required to measure and report other comprehensive income.
A)True
B)False
Q4) What are the advantages of issuing common shares instead of issuing corporate bonds to raise needed funds?
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Chapter 13: Analyzing Financial Statements
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Sample Questions
Q1) The inventory turnover ratio is calculated by dividing
A)cost of goods sold by the ending inventory.
B)cost of goods sold by the beginning inventory.
C)cost of goods sold by the average inventory.
D)average inventory by cost of goods sold.
Q2) The average days' supply in inventory is computed by dividing the days in the year by the ending balance of inventory.
A)True
B)False
Q3) Matt Company paid out $2.30 in dividends per share during 20B.The market price of the share on December 31,20B was $21.00 per share.There were 15,000 shares of share outstanding for the entire year.What was the dividend yield as of December 31,20B?
A)9.13%
B)10.95%
C)16.43%
D)913.04%
Q4) Ratio analysis only involves relationships within a single accounting period.
A)True
B)False
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