Fundamentals of Financial Accounting
Test Preparation
Course Introduction
Fundamentals of Financial Accounting introduces students to the principles and concepts underlying the preparation, analysis, and interpretation of financial statements. The course covers topics such as the accounting cycle, the preparation of balance sheets, income statements, and cash flow statements, and an understanding of assets, liabilities, and equity. Students learn the importance of generally accepted accounting principles (GAAP) and how financial information supports decision-making for businesses and external stakeholders. The skills developed provide a foundation for further study in accounting and finance, as well as practical knowledge for managing financial information in various organizational settings.
Recommended Textbook Financial Accounting 5th Canadian Edition by Walter T. Harrison
Available Study Resources on Quizplus
13 Chapters
1520 Verified Questions
1520 Flashcards
Source URL: https://quizplus.com/study-set/3520 Page 2
Chapter 1: The Financial Statements
Available Study Resources on Quizplus for this Chatper
139 Verified Questions
139 Flashcards
Source URL: https://quizplus.com/quiz/69889
Sample Questions
Q1) Losses are reported on the:
A) income statement
B) balance sheet
C) cash flow statement
D) statement of retained earnings
Answer: A
Q2) When a repurchase of shares is done by a company it:
A) increases the amount of owners' equity
B) decreases the amount of owners' equity
C) decreases the amount of total liabilities
D) increases the amount of total liabilities
Answer: B
Q3) Retained earnings represent cash that is available to a company for future operations and expansion.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Recording Business Transactions
Available Study Resources on Quizplus for this Chatper
164 Verified Questions
164 Flashcards
Source URL: https://quizplus.com/quiz/69890
Sample Questions
Q1) On a trial balance the total of all debits must equal the total of all credits.
A)True
B)False
Answer: True
Q2) When a company performs a service and immediately collects the cash from the customer, which of the following would occur?
A) Net income would increase.
B) Expenses would decrease.
C) Assets would decrease.
D) Shareholders' equity would decrease.
Answer: A
Q3) The payment of an amount owed to a creditor would:
A) increase assets
B) increase liabilities
C) decrease net income
D) decrease liabilities
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Accrual Accounting and the Financial Statements
Available Study Resources on Quizplus for this Chatper
144 Verified Questions
144 Flashcards
Source URL: https://quizplus.com/quiz/69891
Sample Questions
Q1) Which of the following transactions would be recorded at the time the transaction occurs under the accrual basis, but would not be recorded until sometime in the future under the cash basis?
A) sale of merchandise on account
B) payment of interest expenses
C) payment of employee salaries
D) issuance of stock
Answer: A
Q2) People using the cash basis of accounting for their business generally make better decisions.
A)True
B)False
Answer: False
Q3) In what order are financial statements generally prepared?
A) balance sheet, statement of retained earnings, and income statement
B) income statement, statement of retained earnings, and balance sheet
C) income statement, balance sheet, and statement of retained earnings
D) statement of retained earnings, income statement, and balance sheet
Answer: B
Page 5
To view all questions and flashcards with answers, click on the resource link above.
Chapter 4: Internal Control and Cash
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/69892
Sample Questions
Q1) When preparing a bank reconciliation, which of the following items would be subtracted from the bank balance on the bank statement?
A) deposits in transit
B) bank service charges
C) EFT cash payments
D) outstanding cheques
Q2) In a bank reconciliation, a book error:
A) may be added or deducted from the bank balance in the general ledger
B) may be added or deducted from the bank balance on the bank statement
C) must be added to the bank balance in the general ledger
D) must be deducted from the bank balance in the general ledger
Q3) In a bank reconciliation, interest revenue earned on a chequing account would be deducted from the book balance.
A)True
B)False
Q4) As they are less liquid than cash, cash equivalents cannot be reported on the same line as cash.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Short-Term Investments and Receivables
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/69893
Sample Questions
Q1) Which principle of accounting prescribes the use of the allowance method of accounting for bad debts?
A) full disclosure principle
B) historical cost principle
C) revenue recognition principle
D) matching principle
Q2) Under the aging-of-accounts-receivable method:
A) the balance in accounts receivable prior to adjustment must be considered
B) the balance in Allowance for Uncollectible Accounts prior to adjustment is ignored
C) the balance in Allowance for Uncollectible Accounts prior to adjustment must be considered
D) the balance in Bad Debt Expense prior to adjustment must be considered
Q3) In 2014, Digital Asset Management Corp. (DAM) received $2,500,000 on collection from their customers. These cash receipts would be reported on Krane DAM's 2014 cash flow statement as a(n):
A) financing activity
B) operating activity
C) investing activity
D) not reported on the 2014 cash flow statement
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Inventory and Cost of Goods Sold
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/69894
Sample Questions
Q1) Average inventory is equal to:
A) beginning inventory plus cost of goods sold divided by two
B) beginning inventory plus ending inventory divided by two
C) cost of goods sold plus purchases divided by two
D) ending inventory plus cost of goods sold divided by two
Q2) In a merchandising business, gross margin is the difference between sales revenue and the cost of goods sold.
A)True
B)False
Q3) When using the weighted-average cost method to determine the cost of inventory sold, the weighted-average cost per unit is calculated as the:
A) cost of goods available for sale divided by the number of units available for sale
B) cost of goods sold divided by the average number of units in inventory
C) cost of goods sold divided by the number of units sold
D) cost of goods in ending inventory divided by the number of units in ending inventory
Q4) What is the major expense shown on the income statement for a merchandising business?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 7: Property, Plant, and Equipment, and Intangible Assets
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/69895
Sample Questions
Q1) Except for goodwill, the accounting for intangibles is similar to accounting for tangible long-lived assets.
A)True
B)False
Q2) On October 15, 2013, Out West Enterprises purchased new factory equipment for its manufacturing facilities. The new equipment had an invoice price of $16,000, plus a 6% sales tax. In addition, the purchaser was responsible for $950 of freight charges. The sale was subject to 2/10, n/45 credit terms. Upon receipt of the new equipment Out West Enterprises paid $1,200 to have the equipment installed. To finance the purchase, Out West Enterprises borrowed $17,000 from the First Street Bank for 60 days at 12% interest.
Out West Enterprises paid the invoice within 9 days.
Calculate the cost of the factory equipment to be capitalized on the books.
Q3) Which of the following is not a long-lived asset?
A) supplies
B) furniture
C) buildings
D) land
Q4) Explain how a company should decide which depreciation method to use for financial reporting purposes.
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Long-Term Investments and the Time Value of Money
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/69896
Sample Questions
Q1) A long-term investment in common shares acquired during 2014 at a cost of $45,000 has a market value on December 31, 2014, of $45,725. The year-end adjusting entry requires a:
A) credit to Allowance to Adjust Investment to Market for $725
B) debit to Unrealized Gain on Investment for $725
C) debit to Long-Term Investment for $725
D) no entry required
Q2) A controlling interest is normally one where the investor:
A) owns more than 20% of the investee's voting stock
B) owns more than 50% of the investee's voting stock
C) uses the equity method to account for the investment
D) uses the market value method of accounting for the investment
Q3) The receipt of a cash dividend arising from an investment (5% ownership) held by a company requires a:
A) credit to Cash
B) debit to Retained Earnings
C) credit to Retained Earnings
D) credit to Dividend Revenue
Q4) What are consolidated financial statements? What are some of the benefits and limitations of them for ATCO Ltd.?
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Liabilities
Available Study Resources on Quizplus for this Chatper
96 Verified Questions
96 Flashcards
Source URL: https://quizplus.com/quiz/69897
Sample Questions
Q1) On January 1, 2013, JetNew, issued $1,000,000 face value, 5-year bonds with a stated rate of 5% at an effective rate of 4% which brought in $1,044,913. Interest is paid semi-annually on July 1 and December 31. JetNew uses the effective-interest method of amortization.
Prepare the amortization table for the first 3 payment periods.
Q2) Revaluation Magazine receives $90 in advance from a customer for a 3-year subscription. Revaluation Magazine's entry to record this transaction would include:
A) debit to Unearned Subscription Revenue for $90
B) credit to Unearned Subscription Revenue for $90
C) debit to Subscription Revenue for $90
D) credit to Subscription Revenue for $90
Q3) The effective-interest method of amortization keeps interest expense at the same dollar amount of the bond's carrying value for every interest payment over the bond's life.
A)True
B)False
Q4) Describe the two interest rates included in setting the price of a bond.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Shareholders Equity
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/69898
Sample Questions
Q1) A cash dividend becomes a legal liability of the corporation on the:
A) date of payment
B) date of declaration
C) date of record
D) date of distribution
Q2) The rate of return on common shareholders' equity is calculated by dividing net income less preferred dividends by average common shareholders' equity.
A)True
B)False
Q3) What type of shares would an investor purchase if he or she were primarily interested in increasing dividends?
Q4) The ultimate control of the corporation rests with the:
A) federal and provincial governments
B) chief executive officer
C) shareholders
D) employees
Q5) Explain the fundamental difference between retained earnings and share capital.
Q6) What type of shares would an investor purchase if he or she were primarily interested in steady dividends?
Page 12
To view all questions and flashcards with answers, click on the resource link above.
Chapter
Statement of Shareholders Equity
Available Study Resources on Quizplus for this Chatper
71 Verified Questions
71 Flashcards
Source URL: https://quizplus.com/quiz/69899
Sample Questions
Q1) An unqualified (or clean) opinion issued by an external auditor means:
A) the financial statements are reliable, except for one or more items stated in the third paragraph
B) the financial statements are unreliable
C) the auditor was unable to reach a professional opinion
D) the statements are reliable
Q2) Net income is considered by many users to be a more reliable indicator of future earnings than earnings from continuing operations.
A)True
B)False
Q3) Gail. Inc. has 100,000 common shares outstanding at the beginning of 2013. The company issued an additional 50,000 common shares on July 1, 2013. Gail Inc.'s net income for the year ended December 31, 2013 was $300,000; its comprehensive income was $450,000. Gail Inc. paid dividends of $50,000 during the year. What was Gail Inc.'s basic EPS for 2013?
A) $2.00
B) $2.40
C) $3.00
D) $3.60
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: The Statement of Cash Flows
Available Study Resources on Quizplus for this Chatper
127 Verified Questions
127 Flashcards
Source URL: https://quizplus.com/quiz/69900
Sample Questions
Q1) The operating activities section of an indirect method statement of cash flows includes:
A) cash paid for inventory
B) changes in current asset balances
C) cash paid for operating expenses
D) cash received from customers
Q2) On an indirect method statement of cash flows, a decrease in inventory would be:
A) netted against any decreases in accounts payable
B) deducted from net income
C) reflected in the investing activities section
D) added to net income
Q3) Under ASPE interest payments on debt are considered financing activities on a statement of cash flows.
A)True
B)False
Q4) The purchase of land for cash and the sale of a capital asset are viewed as:
A) a negative and positive item on the statement of cash flows
B) a positive and negative item on the statement of cash flows
C) both positive items on the statement of cash flows
D) neither positive nor negative items on the statement of cash flows
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Financial Statement Analysis
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/69901
Sample Questions
Q1) From the list below, select the ratio(s) that help in the analysis of working capital:
A) current ratio
B) quick ratio
C) debt ratio
D) current ratio and quick ratio
Q2) A company reported $75,000 of income for 2012, $80,000 for 2013, and $90,000 for 2014. The percentage change in net income from 2013 to 2014 was:
A) 9.1%
B) 11.1%
C) 12.5%
D) 16.7%
Q3) It is generally considered more useful to know the absolute dollar amount of change in financial statement amounts from year to year than to know the percentage change.
A)True
B)False
Q4) Name some common financial ratios used by investors to compare different companies.
To view all questions and flashcards with answers, click on the resource link above. Page 15