Intermediate Accounting Question
Bank
Course Introduction
Intermediate Accounting builds upon foundational accounting principles to provide a deeper understanding of financial reporting, statement preparation, and the complexities of accounting standards. The course covers topics such as revenue recognition, asset and liability measurement, stockholders equity, income taxes, pensions, leases, and the application of Generally Accepted Accounting Principles (GAAP). Students will analyze and interpret financial statements, solve accounting problems, and explore ethical considerations, preparing them for advanced accounting studies and professional practice.
Recommended Textbook
Financial Accounting An Introduction to Concepts Methods and Uses 14th Edition by Roman L. Weil
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Page 2
Chapter 1: Introduction to Business Activities and Overview
of Financial Statements and the Reporting Process
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Sample Questions
Q1) An income statement connects two successive _____ through its effect on retained earnings.
A)balance sheets
B)cash flow statements
C)cash receipts and disbursement statements
D)funds flow statements
E)financing statements
Answer: A
Q2) _____ reflect values at the balance sheet date, so they reflect that day's economic conditions.
A)Historical amounts
B)Current amounts
C)Present amounts
D)Liquidation amounts
E)Discounted cash flow amounts
Answer: B
Q3) Current liabilities represent obligations a firm expects to pay within one year.
A)True
B)False
Answer: True
Page 3
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Chapter 2: The Basics of Record Keeping and Financial
Statement Preparation: Balance Sheet
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Q1) Which of the following is/are true regarding T-accounts?
A)for each transaction, the amount entered on the left side of (or debited to) the accounts for each transaction equals the amount entered on the right side of (or credited to) the accounts.
B)recording equal amounts of debits and credits for each transaction ensures that the balance sheet equation will always balance.
C)one side of the space formed by the vertical line records increases in the item and the other side records decreases.
D)all of the above
E)none of the above
Answer: D
Q2) Noncurrent assets are expected to be converted to cash over A)a month.
B)a quarter.
C)a half of a year.
D)a year.
E)a period of time greater than a year.
Answer: E
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Chapter 3: The Basics of Record Keeping and Financial
Statement Preparation: Income Statement
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Sample Questions
Q1) Which of the following is not an example of a period expense?
A)the president's salary
B)insurance for the home office
C)accounting and information systems costs
D)support activity costs such as legal services, employee training, and corporate planning.
E)the factory foreman's salary
Answer: E
Q2) On November 1, Year 1, Dorian Collections Agency accepted a $100,000, 3-month note from a customer.The note earns 9% interest per year.What is the amount of interest receivable recorded by Dorian Collections Agency at December 31, Year 1? (Assume no other entries to record interest have been made.)
A)$9,000
B)$1,500
C)$750
D)$0, because interest is not due until February 1 of Year 2
E)$900
Answer: B
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Chapter 4: Balance Sheet: Presenting and Analyzing
Resources and Financing
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Sample Questions
Q1) At December 31, Year 1, Adam Corporation has 5,000 shares of par value common stock, additional paid-in capital of $25,000, total shareholders' equity of $80,000, and retained earnings of $45,000.What is the par value per share?
A)$1.00
B)$1.50
C)$2.00
D)$2.50
E)$3.00
Q2) Balance sheets based on U.S.GAAP and IFRS omit some items and measure others with bias, relative to measurements based on current economic conditions.
A)True
B)False
Q3) A balance sheet prepared according to U.S.GAAP lists assets from most liquid to least liquid, where liquid refers to the ease of converting the asset into cash.
A)True
B)False
Q4) What is conservatism?
Q5) Discuss shareholders' equity, how it is measured and disclosed.
Page 6
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Chapter 5: Income Statement: Reporting Results of Operating Activities
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Sample Questions
Q1) According to the FASB's conceptual framework, comprehensive income includes which of the following?
\(\text { Gross Profit } \quad \text { Operating Income }\)
A)\(\text { No } \quad \text { No }\)
B) \(\text { No } \quad \text { Yes }\)
C) \(\text { Yes } \quad \text { Yes }\)
D) \(\text { Yes } \quad \text { No }\)
E)None of these answer choices is correct.
Q2) The income statement, also called the statement of financial position, provides information, at a point in time, on the firm's productive resources and the financing used to pay for those resources.
A)True
B)False
Q3) All of the following is/are components of comprehensive income except A)foreign currency translation adjustment.
B)unrealized gains and losses on trading securities.
C)deferred gains and losses on derivative financial instruments.
D)change in the minimum pension liability.
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E)All of these answer choices are components of comprehensive income.
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Chapter 6: Statement of Cash Flows
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Sample Questions
Q1) Interpreting a statement of cash flows requires an understanding of the economic characteristics of the industries in which a firm conducts its activities, including capital intensity, growth characteristics, and similar factors.
A)True
B)False
Q2) On the statement of cash flows, cash sale of property, plant and equipment used for the last 5 years in the company's operations is treated as a/an
A)investing activity.
B)financing activity.
C)operating activity.
D)exchange transaction.
E)funds flow activity.
Q3) The inflows and outflows of cash during the year appear in the statement of cash flows in one of three categories: operating, investing, and financing.Explain each category.
Q4) The statement of cash flows provides information that helps the reader in (1) assessing the impact of operations on liquidity and (2) assessing the relations among cash flows from operating, investing, and financing activities.Explain.
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Chapter 7: Introduction to Financial Statement Analysis
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Sample Questions
Q1) The capital provided by common shareholders during the period used for calculating the return on common equity equals
A)the average par value of common stock, capital contributed in excess of par value on common stock, retained earnings, and any other common shareholders' equity accounts for the period.
B)average preferred shareholders' equity less average total shareholders' equity.
C)the ending par value of common stock, capital contributed in excess of par value on common stock, retained earnings, and any other common shareholders' equity accounts for the period.
D)ending preferred shareholders' equity less ending total shareholders' equity.
E)choices a and b
Q2) Describe the relationship between return on assets and return on common shareholders' equity.
Q3) A measure of profitability for a firm engaging in operations selling merchandise in its stores to generate net income includes the rate of return on assets. Discuss the rate of return on assets.
Q4) What are the steps in preparing pro forma financial statements?
Q5) What are pro forma financial statements?
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Chapter 8: Revenue Recognition, Receivables, and Advances From
Customers
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Sample Questions
Q1) The Accounts Receivable, Gross amount less the Allowance for Uncollectibles yields Accounts Receivable, Net, which reflects the amount of cash the firm expects to collect.
A)True
B)False
Q2) A debit balance in the Allowance for Uncollectibles appears on the balance sheet.
A)True
B)False
Q3) After the firm estimates the amount of uncollectible accounts associated with the credit sales of each period, it makes an adjusting entry to debit _____ and credit
A)Bad Debt Expense; Accounts Receivable, Net
B)Bad Debt Expense; Accounts Receivable, Gross
C)Allowance for Uncollectibles; Bad Debt Expense
D)Bad Debt Expense; Allowance for Uncollectibles
E)Allowance for Uncollectibles; Accounts Receivable, Gross
Q4) Discuss the application of the allowance method for sales returns.
Q5) Briefly explain the difference between a sales allowance and a sales discount.
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Q6) Describe the income recognition principles and how they are applied.
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Chapter 9: Working Capital
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Sample Questions
Q1) Which inventory cost flow assumption emphasizes the balance sheet as opposed to the income statement?
A)LIFO method
B)FIFO method
C)weighted-average method
D)acquisition cost
E)specific identification method
Q2) The accountant's definition of working capital is the same as the definition often used in finance.
A)True
B)False
Q3) Of the three cost-flow assumptions, FIFO results in the least fluctuation in gross margins in businesses in which selling prices tend to change as acquisition costs of inventories change.
A)True
B)False
Q4) IFRS prohibits use of the LIFO cost-flow assumption.
A)True
B)False
Q5) Describe cash and cash equivalents.
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Chapter 10: Long-Lived Tangible and Intangible Assets
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Sample Questions
Q1) An impairment loss on all intangibles that do not require amortization, except goodwill, arises when
A)the book value of the assets exceed the undiscounted cash flows.
B)the book value of the assets exceed the market value.
C)the market value of the assets exceed the undiscounted cash flows.
D)the book value of the assets exceed the discounted cash flows.
E)the book value of the assets exceed the liquidation value.
Q2) A firm may retire an asset from service by trading it in on a new asset.U.S.GAAP and IFRS require that firms record trade-in transactions at _____ unless they lack commercial substance.
A)present value of future cash flows
B)replacement value
C)liquidation value
D)fair value
E)undiscounted cash flows
Q3) U.S.GAAP and IFRS provide firms considerable flexibility in choosing their depreciation method(s).
A)True
B)False
Q4) How are periodic depreciation and amortization accounted for?
Page 12
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Chapter 11: Notes, Bonds, and Leases
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Sample Questions
Q1) A document or agreement giving the terms of the bond and the rights and duties of the borrower and other parties to the contract that provides some protection to the bondholders and typically limits the borrower's right to declare dividends, to make other distributions to owners, and to acquire other businesses is known as a
A)bond sinking fund agreement.
B)serial bond funding agreement.
C)bond indenture.
D)creditor indenture.
E)business trust indenture.
Q2) Describe the sources of long-term debt financing.
Q3) The term face value refers to the principal amount printed on the face of the bond certificate.
A)True
B)False
Q4) Modern business usage has come to restrict the word equity to mean only shareholders' equity, both contributed capital and retained earnings.
A)True
B)False
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Chapter 12: Liabilities: Off-Balance Sheet Financing,
Benefits, and Income Taxes
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Q1) The total amount of cash that the employer contributes to the firm's pension plan over time is the total amount of pension expense that the employer must recognize in measuring net income.
A)True
B)False
Q2) Which of the following is/are not true regarding U.S.GAAP and IFRS requirements for income tax accounting for financial reporting purposes?
A)Income taxes expense equals income taxes currently payable.
B)A temporary difference that implies a future tax deduction gives rise to a deferred tax asset.
C)A temporary difference that implies a future increase in income tax payable gives rise to a deferred tax liability.
D)The accountant computes income tax expense using pretax amounts for financial reporting.
E)A permanent difference never affects income tax expense for any period.
Q3) Discuss the accounting for income taxes and the disclosure of income taxes in the financial statements.
Q4) Describe the accounting for employer sponsored defined benefit pension plans.
Page 14
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Chapter 13: Marketable Securities and Derivatives
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Q1) GAAP and IFRS require firms to report trading securities at fair value on the balance sheet.The income statement reports the debit (loss) for decreases in the fair value and the credit (gain) for increases in the fair value of trading securities in an account with a title such as _____.
A)Realized Holding Loss (or Gain or Gains and Losses, net) on Long-Term Securities
B)Unrealized Holding Loss (or Gain or Gains and Losses, net) on Short-term Securities
C)Realized Holding Loss (or Gain or Gains and Losses, net) on Trading Securities
D)Unrealized Holding Loss (or Gain or Gains and Losses, net) on Trading Securities.
E)Realized Holding Loss (or Gain or Gains and Losses, net) on Short-Term Securities.
Q2) What is the accounting treatment for trading securities?
Q3) Firms might use a particular derivative to hedge fair value and to hedge cash flows.
A)True
B)False
Q4) Describe the accounting for a fair value hedge of a recognized asset or liability.
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Chapter 14: Intercorporate Investments in Common Stock
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Q1) (CMA adapted, Dec 92 #9) In a business combination that is accounted for as a purchase and does not create negative goodwill, the assets of the acquired company are to be recorded on the books of the acquiring company at A)original cost.
B)original cost less accumulated depreciation.
C)fair market value.
D)book value.
E)liquidation value.
Q2) Describe what a consolidated income statement shows.
Q3) The equity method of accounting for an investment in the common stock of another company should be used when the investment
A)is composed of common stock and it is the investor's intent to vote the common stock.
B)ensures a source of supply such as raw materials.
C)enables the investor to exercise significant influence over the investee.
D)gives the investor voting control over the investee.
E)None of these answer choices is correct.
Q4) What role does management intent play in the accounting treatment of marketable equity securities?
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Chapter 15: Shareholders Equity: Capital Contributions and Distributions
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Sample Questions
Q1) Which of the following is/are true regarding a reverse stock split?
A)Firms reduce the number of outstanding shares by increasing the par value of the stock.
B)Firms reduce the number of outstanding shares by canceling outstanding shares.
C)A reverse stock split usually increases the market value per share in inverse proportion to the reverse split.
D)Managers and governing boards might use reverse stock splits to keep the market price per share within some target trading range.
E)all of the above
Q2) The par value of common stock represents the
A)liquidation value of the stock.
B)book value of the stock.
C)legal nominal value assigned to the stock.
D)amount received by the corporation when the stock was originally issued.
E)None of these choices is correct.
Q3) Discuss the reasons that investors buy preferred stock and the dividend rights of preferred stockholders.
Q4) Most publicly traded firms operate as corporations.Discuss three advantages of the corporate form.
Page 17
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Chapter 16: Statement of Cash Flows: Another Look
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Q1) The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations under the indirect method depends on the nature of its operations.Service firms will likely show a small amount of
A)subtraction from net income for capital expenditures.
B)addback to net income for capital expenditures.
C)subtraction from net income for depreciation expense.
D)addback to net income for depreciation expense.
E)addback to retained earnings for depreciation expense.
Q2) Describe the effects of transactions involving investments on the statement of cash flows.
Q3) In determining cash flows from operations under the indirect method, the adjustments to convert net income to cash flow from operations generally involve ____ the amount by which a revenue exceeds the related cash receipt for the period (such as equity method earnings exceeding dividends).
A)adding
B)subtracting
C)multiplying
D)dividing
E)cannot be determined from the information provided
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Chapter 17: Synthesis and Extensions
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Q1) The IASB's conceptual framework defines a(n) _____ as a resource controlled by an entity as a result of past events and from which a firm expects future economic benefits.
A)asset
B)liability
C)equity
D)revenue
E)expense
Q2) The write-off of a particular customer's account that becomes uncollectible involves a debit to Allowance for Uncollectibles and a credit to Accounts Receivable.
A)True
B)False
Q3) Explain the accounting for errors and changes in accounting principles and changes in accounting estimates.
Q4) How do firms account for goodwill?
Q5) Describe what is meant by a reporting entity.
Q6) Both U.S.GAAP and IFRS require firms to report certain information about each of their operating segments. What segment information and disclosures are required?
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