Intermediate Accounting Test
Bank
Course Introduction
Intermediate Accounting is designed to build upon foundational accounting principles by delving deeper into the conceptual framework and application of financial reporting standards. This course covers complex topics such as revenue recognition, income measurement, asset and liability valuation, stockholders equity, and the preparation and analysis of financial statements in accordance with Generally Accepted Accounting Principles (GAAP). Students will engage with real-world scenarios, develop technical skills for problem-solving, and gain the analytical tools necessary for interpreting financial information for decision-making in a business context.
Recommended Textbook Financial Statement Analysis 13th Edition by Charles H. Gibson
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Page 2
Chapter 1: Introduction to Financial Reporting
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Sample Questions
Q1) The assumption that deals with when to recognize the costs that are associated with the revenue that is being recognized is:
A)matching.
B)going concern.
C)consistency.
D)materiality.
E)None of the answers are correct.
Answer: A
Q2) The organization that has by federal law the responsibility to adopt auditing standards is the:
A)New York Stock Exchange.
B)Public Company Accounting Oversight Board.
C)Accounting Principles Board.
D)Financial Accounting Standards Board.
E)AICPA Committee on Accounting Procedure.
Answer: B
Q3) Most companies are on a 51-52 week fiscal year.
A)True
B)False Answer: False
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Chapter 2: Introduction to Financial Statements and Other Financial Reporting Topics
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Q1) Ethics can be a particular problem with financial reports.
A)True
B)False
Answer: True
Q2) Financial statements of legally separate entities may be issued to show financial position,income,and cash flow as they would appear if the companies were a single entity.
A)True
B)False
Answer: True
Q3) The proxy is the solicitation sent to stockholders for the election of directors and for the approval of other corporation actions.
A)True
B)False
Answer: True
Q4) Most companies consolidate the parent's and subsidiary's accounts summed. A)True
B)False
Answer: True
Page 4
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Chapter 3: Balance Sheet
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Sample Questions
Q1) When preferred stock has a preference as to dividends,the current year's preferred dividend must be paid before a dividend can be paid to common stockholders.
A)True
B)False
Answer: True
Q2) Depreciation Expense
A)Current Assets
B)Tangible Assets
C)Investments
D)Intangibles
E)Other
F)Current Liability
G)Long-Term Liability
H)Capital Stock
I)Retained Earnings
J)Item Not Included on Balance Sheet
Answer: J
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Page 5
Chapter 4: Income Statement
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Sample Questions
Q1) With a stock dividend,total market value considering all outstanding shares should decline.
A)True
B)False
Q2) If a firm consolidates subsidiaries that are not wholly owned,an income statement item is created that is termed:
A)dividend income.
B)minority share of earnings.
C)equity income.
D)extraordinary.
E)gain from sale of subsidiary.
Q3) Gross profit will be a prominent figure on a single-step income statement.
A)True
B)False
Q4) Noncontrolling interest relects income from ownership of noncontrolling shareholders in the equity of consolidated subsidaries less than wholly owned.
A)True
B)False
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Chapter 5: Basics of Analysis
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Sample Questions
Q1) Different accounting methods can cause some ratios to differ substantially.
A)True
B)False
Q2) In financial statement analysis,ratios are:
A)the only type of analysis where industry data are available.
B)absolute numbers converted to a common base.
C)fractions usually expressed in percent or times.
D)the only indication of the financial position of the firm.
E)None of the answers are correct.
Q3) Denver Dynamics has net income of $2,000,000.Oakland Enterprises has net income of $2,500,000.Which of the following best compares the profitability of Denver and Oakland?
A)Oakland Enterprises is 25% more profitable than Denver Dynamics.
B)Oakland Enterprises is more profitable than Denver Dynamics,but the comparison can't be quantified.
C)Oakland Enterprises is only more profitable if it is smaller than Denver Dynamics.
D)Further information is needed for a reasonable comparison.
E)Oakland Enterprises is more profitable if it is a larger firm than Denver Dynamics.
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Chapter 6: Liquidity of Short-Term Assets;related
Debt-Paying Ability
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Q1) By reporting marketable equity securities under current assets,management picks up a liquidity advantage.
A)True
B)False
Q2) Which of the following would not be classified as a current asset?
A)Cash
B)Marketable securities
C)Receivables
D)Inventories
E)Investments
Q3) Which of the following accounts would not be classified as a current asset?
A)Cash restricted for retirement of bonds
B)Cash and equivalents
C)Cash and certificates of deposit
D)Time deposits
E)Cash
Q4) The use of the allowance for doubtful accounts results in the bad debt expense being charged to the period of sale.
A)True B)False
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Chapter 7: Long-Term Debt-Paying Ability
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Q1) Some revenue and expense items never go on the tax return,but do go on the income statement.
A)True
B)False
Q2) Which of the following statements is not true relating to a capitalized (capital)lease?
A)A capital lease is handled as if the lessee bought the asset.
B)The leased asset is in the fixed assets and the related obligation is included in liabilities.
C)On the balance sheet,the capitalized asset amount will not usually agree with the capitalized liability amount because the liability is reduced by payments,and the asset is reduced by depreciation taken.
D)Usually,a company depreciates capitalized leases faster than payments are made.
E)On the balance sheet,the capitalized asset amount will usually be higher than the capitalized liability amount.
Q3) The balance sheet pension liability considers the projected benefit obligation.
A)True
B)False
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Chapter 8: Profitability
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Q1) Which of the following circumstances will cause sales to fixed assets to be abnormally high?
A)A recent purchase of land.
B)A labor-intensive industry.
C)A highly mechanized facility.
D)High direct labor costs from a new union contract.
E)The use of units-of-production depreciation.
Q2) Sales to fixed assets will have the least meaning if assets are relatively new.
A)True
B)False
Q3) Ratios of profits to sales and to identifiable assets can help to analyze profitability by segment.
A)True
B)False
Q4) The use of debt with high interest charges may cause the net profit margin to be low.
A)True
B)False
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Page 10
Chapter 9: For the Investor
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Q1) Stable dividend policy would most commonly imply:
A)a high price/earnings ratio.
B)a stable dividend yield.
C)stable dividends per share.
D)stable earnings per share.
E)increasing dividends per share.
Q2) \(\frac { \text { Net Income - All Dividends} } { \text { Net Income}}\)
A)degree of financial leverage
B)basic earnings per common share
C)price/earnings ratio
D)percentage of earnings retained
E)dividend payout
F)dividend yield
G)book value per share
Q3) In general,new firms,growing firms,and firms perceived as growth firms will have a relatively low percentage of earnings retained.
A)True
B)False
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11
Chapter 10: Statement of Cash Flows
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Q1) A cash outflow will be generated by an increase in a liability.
A)True
B)False
Q2) The operating cash flow/current maturities of long-term debt and current notes payable is a ratio that indicates long-term,debt-paying ability.
A)True
B)False
Q3) A supporting schedule to the statement of cash flows may include noncash flow items.
A)True
B)False
Q4) Proceeds from sale of equipment
A)Operating
B)Investing
C)Financing
D)Item would not appear
Q5) Sale of equipment for cash is an operating activity.
A)True
B)False
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Chapter 11: Expanded Analysis
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Q1) It is likely that particular attention should be paid to cash,accounts receivable,and inventory when forecasting financial failure.
A)True
B)False
Q2) The studies cited [(Barker,1999), (Demirakos et al,2003),and (Asquith et al,2004)],all agree on the fact that multi-period discounted valuation models seem to play a significant role in analysts' normal valuation activity.
A)True
B)False
Q3) Ideally,a proposed comprehensive budget should be compared with financial ratios that have been agreed upon as part of the firm's corporate objectives.
A)True
B)False
Q4) Most of the ratios given a high significance rating by chartered financial analysts have a primary measure of profitability.
A)True
B)False
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Sample Questions
Q1) The provision for loan losses for a bank is the same as the allowance for doubtful accounts.
A)True B)False
Q2) Which of the following is not a type of earning asset for a bank?
A)Cash
B)Loans
C)Leases
D)Investment securities
E)Money market assets
Q3) The principal revenue source for a bank typically is:
A)gain on sale of real estate.
B)sales.
C)dividend income.
D)interest income.
E)interest expense.
Q4) The passenger load factor measures the percent that a carrier is filled,based on capacity.
A)True B)False
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Chapter 13: Personal Financial Statements and Accounting
for Governments and Not-For-Profit Organizations
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Q1) Which of the following is not an example of a not-for-profit institution?
A)University
B)Hospital
C)State government
D)Church
E)Nnone of the answers are correct.
Q2) State and local governments serve as a steward over public funds.This stewardship responsibility dominates the accounting for state and local governments.
A)True
B)False
Q3) Under GASB Statement No.34,the basic financial statements are to be preceded by the management's discussion and analysis (MD&A).
A)True
B)False
Q4) The principal of fiduciary funds may be distributed.
A)True
B)False
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