Intermediate Financial Accounting Practice Exam
Course Introduction
Intermediate Financial Accounting builds upon foundational accounting principles to deepen students understanding of financial reporting and analysis. The course covers more complex accounting concepts such as revenue recognition, inventory valuation methods, long-term assets, liabilities, investments, and equity transactions. Students will examine the conceptual framework and regulatory environment guiding financial statements, and learn how to apply relevant accounting standards (such as IFRS and GAAP) to various business scenarios. Emphasis is placed on the interpretation of financial statements, ethical considerations, and the implications of accounting decisions for stakeholders.
Recommended Textbook Financial Accounting 4th Canadian Edition by Robert; Libby
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13 Chapters
1686 Verified Questions
1686 Flashcards
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Page 2
Chapter 1: Financial Statements and Business Decisions
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Sample Questions
Q1) External decision makers want answers to all of the following questions except
A)Will the company be able to pay its debts as they come due?
B)Will the company be able to afford employee pay raises this year?
C)How does the company compare in profitability with competitors?
D)Is the company earning satisfactory income?
Answer: B
Q2) On January 1,20A,Taylor Corporation had retained earnings of $6,500,000.During 20A,Taylor had profit of $1,050,000 and dividends of $450,000.What is the amount of Taylor's retained earnings at the end of 20A?
A)$6,050,000.
B)$6,950,000.
C)$7,100,000.
D)$7,550,000.
Answer: C
Q3) The debts of a corporation can be generally viewed as debts of its owners.
A)True
B)False
Answer: False
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3
Chapter 2: Investing and Financing Decisions and the Accounting System
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100 Flashcards
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Sample Questions
Q1) Debits always increase and credits always decrease the accounts. A)True
B)False Answer: False
Q2) Some legal contracts,such as the signing of a contract to hire a new employee,are not reflected in the financial statements.
A)True
B)False Answer: True
Q3) Three of the four basic assumptions that underlie accounting measurement and reporting relate to the statement of financial position.
A)True
B)False Answer: True
Q4) If you trade your computer plus cash for a new car,the cost of the new car is equal to the cash paid plus the market value of the computer.
A)True
B)False Answer: True
Page 4
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Chapter 3: Operating Decisions and the Accounting System
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Sample Questions
Q1) Accrued in the case of expenses means paid in advance,and deferred in the case of expenses means not yet paid.
A)True
B)False
Answer: False
Q2) Why is the cash basis of accounting not appropriate for use by publicly traded corporations?
A)the OSC (Ontario Securities Commission)does not allow its use
B)no assets or liabilities other than cash would ever appear on the statement of financial position,giving a distorted picture of financial position
C)the profit reported could not be distorted if a large customer paid for goods in advance or we postponed paying for goods or services until the next accounting period
D)the cash basis is not permitted for tax purposes
Answer: B
Q3) An increase in revenue represents an increase in shareholders' equity.
A)True
B)False
Answer: True
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Chapter 4: Adjustments,financial Statements,and the Quality of Earnings
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Sample Questions
Q1) The statement of cash flows does which of the following?
A)explains what caused profit during the accounting period.
B)identifies all assets held at the end of the accounting period by type and amount.
C)explains that the trial balance is in balance.
D)explains all of the sources and uses of cash during the accounting period.
Q2) At the end of its accounting period,December 31,20B,May Corporation owed $1,000 for property taxes which had not been recorded nor paid.Therefore,the 20B adjusting entry should be which of the following?
A)$1,000 credited to an expense account and debited to a liability account.
B)$1,000 debited to an expense account and credited to an asset account.
C)$1,000 credited to a liability account and debited to an expense account.
D)$1,000 debited to a liability account and credited to an asset account.
Q3) At the end of 20D,the following data were taken from the accounts of Timberline Company: The 20D closing entries would include which of the following?
A)$10,000 net credit to retained earnings.
B)$10,000 net debit to retained earnings.
C)$190,000 debit to retained earnings.
D)$180,000 credit to retained earnings.
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Chapter 5: Communicating and Interpreting Accounting Information
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Sample Questions
Q1) The date in the heading of a statement of cash flows should say,"At December 31,20A," rather than "For the Year Ended December 31,20A."
A)True
B)False
Q2) The purchase of a piece of equipment in exchange for common shares must be reported on the statement of cash flows.
A)True
B)False
Q3) Winn Company's 20B income statement reported total revenues,$110,000,and total expenses (including $10,000 depreciation),$70,000 .The 20B balance sheet reported the following: trade receivables--beginning balance,$16,000 and ending balance,$14,000; wages payable--beginning balance,$2,000 and ending balance,$1,500.Therefore,based only on this information,the 20B net cash inflow from operating activities was which of the following?
A)$48,500.
B)$50,000.
C)$51,500.
D)$59,500.
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Chapter 6: Reporting and Interpreting Sales Revenue, receivables, and Cash
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Sample Questions
Q1) Asset turnover measures which of the following?
A)the profit generated by efficient management of assets
B)how quickly we liquidate our inventory
C)the sales revenue generated by efficient management of assets
D)the ability to earn profit for the shareholders
Q2) On a classified statement of financial position,prepaid expenses are classified as A)a current liability.
B)property,plant,and equipment.
C)a current asset.
D)a long-term investment.
Q3) Liberward,Inc.,sold and issued 1,000 shares for $15 per share.The book value of the shares was $10 per share.The journal entry to record the share issue would include which of the following?
A)a debit to Cash for $10,000.
B)a credit to Common Shares for $10,000.
C)a credit to Common Shares for $15,000.
D)a credit to Cash for $15,000
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Page 8
Chapter 7: Reporting and Interpreting Cost of Goods Sold and Inventory
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Sample Questions
Q1) MP Co.'s gross profit percentage decreased from 59.2% in 2011 to 58.3% in 2012.This means that MP Co.'s cost of goods sold as a percentage of sales has decreased.
A)True
B)False
Q2) During 20A,Thomas Company recorded bad debt expense of $15,000 and wrote off an uncollectible tradereceivable amounting to $5,000.Assuming a January 1,20A,credit balance in the allowance for doubtful accounts of $10,000,the December 31,20A,balance in the allowance account would be which of the following?
A)$5,000.
B)$15,000.
C)$20,000.
D)$25,000.
Q3) The receivable turnover ratio is computed by dividing net sales by net trade receivables at the end of the year.
A)True
B)False
Q4) What are "cash equivalents"? Specifically where would they appear on the financial statements?
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Chapter 8: Reporting and Interpreting Property, plant, and Equipment; Intangibles; and Natural Resources
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Sample Questions
Q1) When a periodic inventory system is used,a sales transaction requires two journal entries,while under the perpetual system,a sales transaction requires only one journal entry.
A)True
B)False
Q2) The lower of cost and net realizable value rule for inventory is an example of the application of:
A)The conservatism principle
B)The historical cost principle
C)The materiality constraint
D)The matching principle
Q3) In 20A,C Co.had an inventory turnover ratio of 6.11 while P Co.had a ratio of 10.67.Which of the following might most accurately explain the difference in their ratios?
A)C Co.had less inventory on hand in relation to their amount of cost of goods sold.
B)C Co.has a lower sales figure so cost of goods sold is lower leading to a higher turnover ratio.
C)C Co.takes a longer number of days to sell their inventory.
D)C Co.has a poor credit rating.
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Chapter 9: Reporting and Interpreting Liabilities
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Sample Questions
Q1) How is the matching principle related to the recording of depreciation on tangible operational assets?
A)The matching principle requires a company to use the same depreciation.
B)Once a particular depreciation method is adopted for a particular asset,the owner must continue to use the same method.
C)The accountant who calculates the depreciation may assume that the company will continue in business as long as the estimated useful life of the asset.
D)A portion of the cost of the asset should be allocated as an expense for the periods in which the asset helps the business to earn revenue.
Q2) Sure Company purchased a machine on January 1,20A,at a cash cost of $12,000.The estimated useful life is 10 years,and the estimated residual value is $3,000.The company will use the declining-balance method based on a 150 percent acceleration rate.What will be the depreciation expense for the second year?
A)$900
B)$1,350
C)$1,530
D)$1,800
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Page 11
Chapter 10: Reporting and Interpreting Bond Securities
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Sample Questions
Q1) G Co and A Co are both in the biotechnology industry.In 2012,G Co reported a trade payables turnover of 7.71 and A Co reported a ratio of 3.06.Which of the following is an incorrect reason for the difference in ratios?
A)A Co has a higher average trade payables in comparison to their cost of goods sold.
B)A Co has a lower average trade payables in comparison to their cost of goods sold.
C)A Co is taking longer to pay vendors
D)G Co has a better payment record in terms of timely payment to vendors.
Q2) Match the liabilities with their usual classification on the statement of financial position by entering the appropriate letters in the spaces.
Usual Classification
A.Current liability
B.Long-term liability
C.Current or long-term liability
D.None of the above
Q3) Liabilities are defined as probable future economic benefits.
A)True
B)False
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Chapter 11: Reporting and Interpreting Stockholders Equity
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Sample Questions
Q1) On January 1,20A,Ross Company acquired a truck that had a purchase price of $20,000.The seller agreed to allow Ross to pay for the truck over a two-year period at 10% interest with equal payments due at the end of 20A and 20B.What is the amount of each annual payment the company must make (round to the nearest dollar)?
A)$11,524
B)$14,151
C)$17,751
D)$22,267
Q2) When a company prepares a bond indenture,certain provisions of the bonds are included.Which of the following are not provisions specified in the indenture?
A)Dates of interest payments.
B)Rate of interest to be paid.
C)Cash to be received at the issue date.
D)Maturity date.
Q3) If there is a loss on bonds redeemed early,it is
A)debited directly to Retained Earnings.
B)reported as "Other Expense" on the income statement.
C)reported as part of profit from operations on the income statement.
D)debited to Interest Expense,as a cost of financing.
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Page 13
Chapter 12: Statement of Cash Flows
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Sample Questions
Q1) Which of the following represents the shares sold in either an initial public offering or subsequent seasoned new issuances?
A)Authorized shares
B)Issued shares
C)Outstanding shares
D)Unissued shares
Q2) Legal capital is the permanent amount of capital,defined by law,that must remain invested in the corporation.
A)True
B)False
Q3) Retained earnings is the cash from operations retained by the corporation which may be returned to investors in the form of dividends.
A)True
B)False
Q4) Partnerships,sole proprietorships,and corporations are three basic forms of business organizations.
A)True
B)False
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Page 14
Chapter 13: Analyzing Financial Statements
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Sample Questions
Q1) Profitability ratios are evaluated by comparing them over time for a single company or by comparing them with ratios for similar companies.
A)True
B)False
Q2) Hayes Company had an average age of accounts receivable of 25 days and net credit sales of $31,000.Assume a 365 day year.What was the amount of the average net receivables?
A)$1,152
B)$2,123
C)$4,000
D)$5,760
Q3) Matt Company paid out $2.30 in dividends per share during 20B.The market price of the share on December 31,20B was $21.00 per share.There were 15,000 shares of share outstanding for the entire year.What was the dividend yield as of December 31,20B?
A)9.13%
B)10.95%
C)16.43%
D)913.04%
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