Intermediate Accounting
Exam Materials
Course Introduction
Intermediate Accounting is a comprehensive course that delves deeper into the principles and practices of financial accounting beyond the introductory level. It focuses on the conceptual framework underlying financial reporting, detailed analysis of assets, liabilities, and shareholders equity, and the preparation of complex financial statements in accordance with generally accepted accounting principles (GAAP). Emphasis is placed on revenue recognition, time value of money, and accounting for income taxes, pensions, and leases. The course is designed to enhance students analytical and problem-solving skills, preparing them for advanced accounting studies and professional careers in accounting and finance.
Recommended Textbook
Financial and Managerial Accounting 11th Edition by Carl S. Warren
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15 Chapters
2679 Verified Questions
2679 Flashcards
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Chapter 1: Introduction to Accounting and Business
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194 Verified Questions
194 Flashcards
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Sample Questions
Q1) An income statement is a summary of the revenues and expenses of a business as of a specific date.
A)True
B)False
Answer: False
Q2) Given the following data:
Dec. 31, 2012 Dec. 31, 2011
Total liabilities $118,750 $104,000
Total stockholders' equity 95,000 80,000
a. Compute the ratio of liabilities to stockholders' equity for each year.
b. Has the creditors' risk increased or decreased from December 31, 2011, to December 31, 2012?
Answer: a.
Dec. 31, 2012 Dec. 31, 2011
Total liabilities $118,750 $104,000
Total stockholders' equity 95,000 80,000
Ratio of liabilities to stockholders' equity 1.250 1.30 ($118,750/$95,000) ($104,000/$80,000)
b. Decreased
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3
Chapter 2: Analyzing Transactions
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222 Flashcards
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Sample Questions
Q1) Which of the following entries records the receipt of cash for two months' rent? The cash was received in advance of providing the service.
A) Prepaid Rent, debit; Rent Revenue, credit.
B) Cash, debit; Unearned Rent, credit.
C) Cash, debit; Prepaid Rent, credit.
D) Cash, debit; Rent Expense credit.
Answer: B
Q2) A chart of accounts is
A) the same as a balance sheet
B) usually a listing of accounts in alphabetical order
C) usually a listing of accounts in financial statement order
D) used in place of a ledger
Answer: C
Q3) The right hand side of a T account is known as a debit and the left hand side is known as a credit.
A)True
B)False
Answer: False
Q4) Prepare a journal entry on March 27 for the payment of $8,000 in dividends.
Answer: 11ea9299_7dce_128e_85c7_01882ae826fa_TB6235_00
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Chapter 3: The Adjusting Process
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179 Flashcards
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Sample Questions
Q1) Prepaid expenses are eventually expected to A) become expenses when their future economic value expires. B) become revenues when services are performed. C) become expenses in the period when they are paid. D) become revenues when the liability is no longer owed.
Answer: A
Q2) Using accrual accounting, revenue is recorded and reported only A) when cash is received without regard to when the services are rendered B) when the services are rendered without regard to when cash is received C) when cash is received at the time services are rendered D) if cash is received after the services are rendered
Answer: B
Q3) A company pays $360 for a yearly trade magazine on August 1. The adjusting entry on December 31 is debit Unearned Subscription Revenue, $150 and credit Subscription Revenue, $150.
A)True
B)False
Answer: False
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5
Chapter 4: Completing the Accounting Cycle
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196 Flashcards
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Sample Questions
Q1) The post-closing trial balance will generally have fewer accounts than the trial balance.
A)True
B)False
Q2) The journal entry to close the Fees Earned, $275, and Rent Revenue, $200, accounts on December 31st during the closing process would be
A) Dec. 31 Fees Earned 275 Rent Revenue 200
Income Summary 475
B) Dec. 31 Income Summary 475 Fees Earned 275 Rent Revenue 200
C) Dec. 31 Revenues 475 Income Summary 475
D) Dec. 31 Income Summary 475 Revenues 475
Q3) After analyzing transactions, the next step would be to post the transactions in the ledger.
A)True
B)False
Q4) The most important output of the accounting cycle is the financial statements.
A)True
B)False
Q5) Explain how net income or loss is determined by using the work sheet.
Page 6
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Chapter 5: Accounting for Merchandising Businesses
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221 Flashcards
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Sample Questions
Q1) Under the perpetual inventory system, when a sale is made, both the sale and cost of merchandise sold are recorded.
A)True
B)False
Q2) On March 15th Monroe Sales sells $9,525.00 on account to Garrison Brewer with terms of 2/10, n/30. The cost of merchandise sold was $6,905.00.
(a) Journalize the sale and the recognition of the cost of the sale.
(b) On March 20th, a $125.00 credit memo is given to Garrison Brewer due to merchandise that was the wrong color. Journalize this event. The cost of the returned merchandise was $65.
(c) On March 25th, Garrison Brewer submits payment in full. Journalize this event.
Q3) When the seller offers a sales discount, even if borrowing has to be done, it is generally advantageous for the buyer to pay within the discount period.
A)True
B)False
Q4) Based upon the following data, determine the cost of merchandise sold for August.
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Page 7
Chapter 6: Inventories
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Sample Questions
Q1) If merchandise inventory is being valued at cost and the purchase price is steadily falling, which method of costing will yield the largest net income?
A) average cost
B) LIFO
C) FIFO
D) weighted average
Q2) While taking a physical inventory, a company counts their inventory as less than the actual amount on hand. How will this error affect the income statement?
Q3) Based on the following information, compute (a) Inventory turnover; (b) Average daily cost of merchandise sold using a 365 day year; and (c) Number of days' sales in inventory.
April 30, 2012
Cost of merchandise sold $ 195,640
Inventory:
Beginning 20,500
Ending 18,628
Q4) List three different security measures taken by stores to safeguard inventory.
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Chapter 7: Sarbanes-Oxley, Internal Control, and Cash
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the customer. What entry is required in the company's accounts?
A) debit Notes Receivable; credit Cash
B) debit Cash; credit Miscellaneous Income
C) debit Cash; credit Notes Receivable
D) debit Accounts Receivable; credit Cash
Q2) During a bank reconciliation process,
A) Outstanding checks and deposits in transit are added to the bank statement balance.
B) Outstanding checks are subtracted and deposits in transit are added to the bank statement balance.
C) Outstanding checks and deposits in transit are subtracted from the bank statement balance.
D) Outstanding checks are added and deposits in transit are subtracted from the bank statement balance.
Q3) List and define each of the five elements of internal control.
Q4) Why would a bank require a company to maintain a compensating balance?
Q5) Describe the features of a voucher system and list typical supporting documents for a voucher.
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Chapter 8: Receivables
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Sample Questions
Q1) The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is
A) $40,000
B) $40,400
C) $43,600
D) $44,000
Q2) If a promissory note is dishonored, the payee should still record interest revenue.
A)True
B)False
Q3) Allowance for Doubtful Accounts has a debit balance of $500 at the end of the year (before adjustment), and bad debt expense is estimated at 4% of net credit sales. If net credit sales are $600,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts is
A) $24,500
B) $23,500
C) $24,000
D) cannot be determined
Q4) Other than accounts receivable and notes receivable, name other receivables that might be included in the general ledger.
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Page 10
Chapter 9: Fixed Assets and Intangible Assets
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Sample Questions
Q1) A new machine with a purchase price of $94,000, with transportation costs of $8,000, installation costs of $5,000, and special acquisition fees of $2,000, would have a cost basis of
A) $ 99,000
B) $107,000
C) $102,000
D) $109,000
Q2) The journal entry for recording an operating lease payment would
A) be a memo entry only
B) debit the fixed asset and credit Cash
C) debit an expense and credit Cash
D) debit a liability and credit Cash
Q3) Comment on the validity of the following statements. "As an asset loses its ability to provide services, cash needs to be set aside to replace it. Depreciation accomplishes this goal."
Q4) Assets may be grouped according to common traits and depreciated by using a single composite rate.
A)True
B)False
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Chapter 10: Current Liabilities and Payroll
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172 Verified Questions
172 Flashcards
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Sample Questions
Q1) In a defined benefits plan, the employer bears the investment risks in funding a future retirement income benefit.
A)True
B)False
Q2) Which of the following is an example of a variable component of a payroll system?
A) hours worked
B) medicare tax rate
C) rate of pay
D) social security number
Q3) Payroll taxes are based on the employee's net pay.
A)True
B)False
Q4) During the first year of operations, employees earned vacation pay of $35,000. The vacations will be taken during the second year. The vacation pay expense should be recorded in the second year as the vacations are taken by the employees.
A)True
B)False
Q5) List five internal controls that relate directly to payroll.
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Page 12
Chapter 11: Corporations: Organization, Stock Transactions, and Dividends
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168 Flashcards
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Sample Questions
Q1) The declaration of a cash dividend decreases a corporation's stockholders equity and decreases its assets.
A)True
B)False
Q2) The financial loss that each stockholder in a corporation can incur is usually limited to the amount invested by the stockholder.
A)True
B)False
Q3) How is treasury stock shown on the balance sheet?
A) as an asset
B) as a decrease in stockholders' equity
C) as an increase in stockholders' equity
D) treasury stock is not shown on the balance sheet
Q4) On February 1, Marine Company reacquired 7,500 shares of its common stock at $30 per share. On March 15, Marine sold 4,500 of the reacquired shares at $34 per share. On June 2, Marine sold the remaining shares at $28 per share.
Required: Journalize the transaction of February 1, March 15, and June 2.
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Chapter 12: Long-Term Liabilities: Bonds and Notes
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181 Flashcards
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Sample Questions
Q1) The higher the times interest earned ratio, the better the creditors' protection.
A)True
B)False
Q2) When the market rate of interest was 11%, Valley Corporation issued $100,000, 8%, 10-year bonds that pay interest semiannually. Using the straight-line method, the amount of discount or premium to be amortized each interest period would be
A) $4,000
B) $896
C) $17,926
D) $1,793
Q3) The present value of $30,000 to be received in two years, at 12% compounded annually, is (rounded to nearest dollar)
A) $23,916
B) $37,632
C) $23,700
D) $30,000
Q4) (a) Prepare the journal entry to issue $200,000 bonds which sold for $195,000 (b) Prepare the journal ertry to issue $200,000 bonds which sold for $204,000
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Page 14
Chapter 13: Investments and Fair Value Accounting
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137 Flashcards
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Sample Questions
Q1) The equity method causes the investment account to mirror the proportional changes in book value of the investee.
A)True
B)False
Q2) Under the equity method, the receipt of cash dividends on an investment in common stock of Vallerio Corporation is accounted for as a debit to Cash and a credit to
A) Investment in Vallerio
B) Retained Earnings
C) Dividend Revenue
D) Dividend Receivables
Q3) Define (1) debt securities and (2) equity securities. Include their similarities and differences in your discussion.
Q4) Fair value accounting is used more under Generally Accepted Accounting Principles (GAAP) than it is under International Financial Reporting Standards (IRFS).
A)True
B)False
Q5) (1) Discuss factors contributing to the trend to fair value accounting. (2) What are some of the disadvantages associated with using fair value?
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Chapter 14: Statement of Cash Flows
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162 Flashcards
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Sample Questions
Q1) Accounts receivable from sales transactions were $44,000 at the beginning of the year and $53,000 at the end of the year. Net income reported on the income statement for the year was $105,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method is
A) $105,000
B) $114,000
C) $96,000
D) $158,000
Q2) Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?
A) depreciation expense
B) gain on sale of land
C) a loss on the sale of equipment
D) dividends declared and paid
Q3) Cash paid to acquire treasury stock should be shown on the statement of cash flows from investing activities.
A)True
B)False
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Page 16
Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) Current position analysis indicates a company's ability to liquidate current liabilities.
A)True
B)False
Q2) The ratio of the sum of cash, receivables, and marketable securities to current liabilities is referred to as the current ratio.
A)True
B)False
Q3) In 2012 Robert Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000. They had 50,000 shares of common stock outstanding during the entire year. Robert Corporation's common stock is selling for $50 per share on the New York Stock Exchange. Robert Corporation's price-earnings ratio is
A) 10 times.
B) 5 times.
C) 2 times.
D) 8 times.
Q4) Why would you or why wouldn't you compare an organization like Ford Motor Company to the local car dealer "Johnson City Ford/Lincoln/Mercury" in vertical and horizontal analysis?
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