Intermediate Accounting Exam Practice
Tests
Course Introduction
Intermediate Accounting delves deeper into the principles and frameworks of financial accounting introduced at the introductory level. This course covers a comprehensive analysis of the recognition, measurement, and reporting of assets, liabilities, equity, revenues, and expenses in accordance with generally accepted accounting principles (GAAP). Students will explore complex topics such as income recognition, inventories, investments, long-term assets, intangible assets, current and long-term liabilities, and shareholders' equity. Emphasis is placed on preparing and analyzing financial statements, understanding the ethical implications of accounting decisions, and developing the analytical skills necessary for advanced professional accounting practice.
Recommended Textbook
Financial Accounting 2nd Edition by J. David Spiceland
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15 Chapters
1948 Verified Questions
1948 Flashcards
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Page 2
Chapter 1: Accounting Information and Decision Making
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Sample Questions
Q1) Today,financial accounting and reporting standards in the United States are established primarily by the:
A)Securities and Exchange Commission.
B)International Accounting Standards Board.
C)Financial Accounting Standards Board.
D)U.S.Congress.
Answer: C
Q2) Use the following appropriate amounts to calculate net income: Revenues,$12,000; Liabilities,$5,000; Expenses,$4,000; Assets,$19,000; Dividends,$4,000.
A)$6,000.
B)$8,000.
C)$4,000.
D)$14,000.
Answer: B
Q3) The difference between revenues and expenses is referred to as net income or net loss.
A)True
B)False
Answer: True
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Page 3
Chapter 2: The Accounting Information System
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Sample Questions
Q1) Consider the following transactions for Mittel Corporation:
a.Sell common stock for $10,000.
b.Purchase equipment for $11,500 cash.
c.Pay employee salaries of $3,700.
d.Provides services to customers for $6,200 cash.
1.Post these transactions to the Cash T-account.Assume the balance of Cash before these transactions is $4,200.
2.Calculate the ending balance of the Cash account.
Answer: \[\begin{array}{l}
\text { Cash }\\
\begin{array} { r | r }
\hline 4,200 & \\
10,000 & 11,500 \\
6,200 & 3,700 \\
\hline 5,200 & \end{array}
\end{array}\]
Q2) A company sells common stock for $20,000 cash.Record the transaction.
Answer: Cash\(\quad 20,000\) Common Stock\(\quad 20,000\)
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Page 4
Chapter 3: The Financial Reporting Process
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Sample Questions
Q1) Unearned revenues occur when cash is received after the revenue is earned.
A)True
B)False Answer: False
Q2) Long-term asset categories include investments; property,plant,and equipment; and intangible assets.
A)True
B)False Answer: True
Q3) Accrued revenues involve the receipt of cash after the revenue has been earned and an asset has been recorded.
A)True
B)False Answer: True
Q4) Long-term assets are assets that provide a benefit to a company for more than one year.
A)True
B)False Answer: True
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Chapter 4: Cash and Internal Controls
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Sample Questions
Q1) Which of the following is NOT a design feature of effective internal controls?
A)Allow greater reliance by investors on reported financial statements.
B)Prevent fraudulent or errant financial reporting.
C)Ensure the company's price advantage over competitors.
D)Prevent misuse of company funds by employees.
Q2) A company's cash is reported in two financial statements - income statement and statement of cash flows.
A)True
B)False
Q3) What key piece of legislation was passed in response to corporate accounting scandals by Enron,WorldCom,and others?
A)Sarbanes-Oxley Act.
B)1933 Securities Act.
C)1934 Securities Exchange Act.
D)Regulation Fair Disclosure.
Q4) Operating cash flows would exclude:
A)Payment of employee salaries.
B)Receipt of cash from customers.
C)Payment of dividends.
D)Payment for advertising.
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Chapter 5: Receivables and Sales
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Sample Questions
Q1) At December 31,Gill Co.reported accounts receivable of $238,000 and an allowance for uncollectible accounts of $600 (credit).An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable.The amount of the adjustment for uncollectible accounts would be:
A)$6,540.
B)$7,800.
C)$7,140.
D)$7,740.
Q2) Tom's Textiles shipped the wrong material to a customer,who refused to accept the order.This is an example of a:
A)Sales Revenue.
B)Sales discount.
C)Sales return.
D)Sales allowance.
Q3) Under the allowance method,when a company collects cash from an account previously written off,total assets increase.
A)True
B)False
Q4) What does it mean to report accounts receivable at their net realizable value.
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Chapter 6: Inventory and Cost of Goods Sold
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Sample Questions
Q1) Using a perpetual inventory system,the purchase of inventory is recorded with a debit to the Purchases account,which is a temporary account closed to cost of goods sold at the end of the period.
A)True
B)False
Q2) At the end of a reporting period,Gamble Corporation determines that its ending inventory has a cost of $300,000 and a market value of $230,000.What would be the effect(s)of the adjustment to write down inventory to market value?
A)Decrease total assets.
B)Decrease net income.
C)Increase retained earnings.
D)a and b.
Q3) What are the three primary cost flow assumptions? How does the specific identification method differ from these three primary cost flow assumptions?
Q4) Merchandising companies purchase inventories that are primarily in finished form for resale to customers.
A)True
B)False
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Chapter 7: Long-Term Assets
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Sample Questions
Q1) Asset turnover is net sales divided by ending total assets. Asset turnover is net sales divided by average total assets.
A)True
B)False
Q2) Depreciation in accounting records the decrease in value of an asset. Depreciation in accounting is the process of allocating to expense the cost of an asset over its service life.
A)True
B)False
Q3) Burger Chef acquired a delivery truck on March 1,2012 for $26,000.The company estimates a residual value of $2,000 and a 6-year service life.It expects to drive the truck 80,000 miles.Actual mileage was 12,000 miles in 2012 and 16,000 miles in 2013.Calculate depreciation expense using the activity-based method for 2012 and 2013,assuming a December 31 year-end.
Q4) A more comparable measure of profitability than income is return on assets,which equals net income divided by average total assets.
A)True
B)False
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Page 9
Chapter 8: Current Liabilities
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Sample Questions
Q1) A lower current ratio or acid-test ratio generally indicates a greater ability to pay current liabilities on a timely basis.
A)True
B)False
Q2) When a gain contingency is probable and the amount of gain can be reasonably estimated,the gain should be:
A)Reported in the income statement and disclosed.
B)Offset against stockholders' equity.
C)Disclosed,but not recognized in the income statement.
D)Reported in the income statement,but not disclosed.
Q3) During January,Deluxe Printing pays employee salaries of $1 million.Withholdings in January are $76,500 for the employee portion of FICA,$210,000 for federal and state income tax,and $40,000 for the employee portion of health insurance (payable to Blue Cross/Blue Shield).The company incurs an additional $38,000 for federal and state unemployment tax and $30,000 for the employer portion of health insurance.
1.Record the employee salary expense,withholdings,and salaries payable.
2.Record the employer-provided fringe benefits.
3.Record the employer payroll taxes.
Q4) Why is it important to distinguish between current and long-term liabilities?
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Chapter 9: Long-Term Liabilities
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Sample Questions
Q1) What is capital structure? Why would a company choose to borrow money rather than issue additional stock?
Q2) The Titan retires a $20 million bond issue when the carrying value of the bonds is $18 million,but the market value of the bonds is $23 million.The entry to record the retirement will include:
A)A debit of $5 million to a loss account.
B)A credit of $5 million to a gain account.
C)No gain or loss on retirement.
D)A debit to cash for $18 million.
Q3) The stated interest rate is the rate quoted in the bond contract used to calculate the cash payments for interest.
A)True
B)False
Q4) At the maturity date,the carrying value will equal the face amount of the bond.
A)True
B)False
Q5) Bonds are the most common form of corporate debt.
A)True
B)False
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) South Beach Apparel issued 10,000 shares of $1 par value stock for $5 per share.What is true about the journal entry to record the issuance?
A)Debit Common Stock $10,000.
B)Credit Cash $50,000.
C)Credit Common Stock $50,000.
D)Credit Additional Paid-In Capital $40,000.
Q2) The financial statements of Heatwave Athletic Wear include the following selected data ($ in millions): Sales,$22,502; Net income $875; Beginning stockholders' equity $3,567; Ending stockholders' equity,$4,102.Calculate the return on equity.
Q3) The PE ratio:
A)tends to be higher for growth stocks.
B)tends to be higher for value stocks.
C)indicates how a stock is trading in relation to cumulative earnings over the life of the company.
D)typically is less than 1.
Q4) Authorized stock is the number of shares that have been sold to investors.
A)True
B)False
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Page 12
Chapter 11: Statement of Cash Flows
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Sample Questions
Q1) Mary's Music Store reported net income of $135,000.Beginning balances in Accounts Receivable and Accounts Payable were $29,000 and $26,000,respectively.Ending balances in these accounts were $30,000 and $24,000,respectively.Assuming that all relevant information has been presented,Mary's cash flows from operating activities would be:
A)$132,000.
B)$134,000.
C)$136,000.
D)$138,000.
Q2) Which of the following is an example of a cash outflow from an investing activity?
A)Payment of cash for treasury stock.
B)Payment of cash for the purchase of land.
C)Payment of cash for inventory.
D)Payment on a long-term note payable.
Q3) We report the actual amount of cash proceeds received from the sale of land as a cash inflow from investing activities.
A)True
B)False
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13
Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) Using horizontal analysis,if the base year is negative and the following year is positive,the percentage change is just as useful as if the base year and the following year were both positive.
A)True
B)False
Q2) We report any profits or losses on discontinued operations in the current year,separately from profits and losses on the portion of the business that will continue.
A)True
B)False
Q3) Which of the following items is most likely to be reported as an extraordinary loss?
A)Losses due to the write-down of inventory.
B)Losses on the sale of long-term assets.
C)Losses due to business restructuring.
D)Uninsured losses from a natural disaster.
Q4) Other things being equal,the higher the debt to equity ratio,the higher the risk of bankruptcy.
A)True
B)False
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Chapter 13: Time Value of Money
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Sample Questions
Q1) Future value is how much an amount today will grow to be in the future.
A)True
B)False
Q2) How much will $8,000 grow to in five years,assuming an interest rate of 8% compounded quarterly?
A)$10,989.
B)$11,755.
C)$11,888.
D)$12,013.
Q3) Present value indicates how much a present amount of money will grow to in the future.
A)True
B)False
Q4) Two banks each have stated CD rates of 12%.Bank A compounds quarterly and Bank B compounds semiannually.Explain which bank offers the better CD.
Q5) What is the relationship between the present value of a single amount and the present value of an annuity?
Q6) Briefly explain why the value of $100 received today is greater than the value of $100 received one year from now.
Page 15
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Chapter 14: Investments
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Sample Questions
Q1) Under the equity method,the investor includes in net income its portion of the investee's net income.
A)True
B)False
Q2) Sports Spectacular purchased 1,000 shares of stock in The Athletic Warehouse for $30 per share.The investment is properly classified as a trading security.By the end of the year,the stock price has increased to $32 per share.How would the change in stock price affect Sports Spectacular's net income?
A)Increase net income by $32,000.
B)Increase net income by $30,000.
C)Increase net income by $2,000.
D)No effect.
Q3) Unrealized gains and losses from changes in the fair value of available-for-sale securities are reported as part of current net income.
A)True
B)False
Q4) How can an investor benefit from an equity investment that does not pay dividends?
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16
Chapter 15: International Financial Reporting Standards
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Sample Questions
Q1) Which of the following is not a reason why accounting differs across countries?
A)Culture.
B)Population.
C)Tax laws.
D)Sources of financing.
Q2) IFRS allows,but does not require,revaluation of property,plant and equipment to fair value.
A)True
B)False
Q3) How is preferred stock reported differently under U.S.GAAP and IFRS? Do you think preferred stock is a liability or an equity item? Why?
Q4) The body primarily responsible for establishing a single set of global accounting standards is the:
A)IASB.
B)SEC.
C)FASB.
D)IOSCO.
Q5) Describe at least five reasons why accounting practices differ across countries.Which reason do you think is most important? Explain why.
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