Introduction to Financial Accounting Test
Preparation
Course Introduction
Introduction to Financial Accounting provides students with a foundational understanding of the principles, concepts, and methods used in the preparation and interpretation of financial statements. The course covers topics such as the accounting cycle, double-entry bookkeeping, accrual accounting, and the creation and analysis of balance sheets, income statements, and cash flow statements. Emphasis is placed on how financial information is used by investors, creditors, and management to make informed decisions. Through practical examples and exercises, students develop essential skills in recording, classifying, and summarizing financial transactions in accordance with generally accepted accounting principles (GAAP).
Recommended Textbook
Corporate Financial Accounting 12th Edition by Carl S. Warren
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15 Chapters
2628 Verified Questions
2628 Flashcards
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Chapter 1: Introduction to Accounting and Business
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184 Verified Questions
184 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) Cash investments made by stockholders in exchange for capital stock in a business are reported on the statement of cash flows in the
A)financing activities section
B)investing activities section
C)operating activities section
D)supplemental statement
Answer: A
Q3) Two common areas of accounting that respectively provide information to internal and external users are
A)forensic accounting and financial accounting
B)managerial accounting and financial accounting
C)managerial accounting and environmental accounting
D)financial accounting and tax accounting systems
Answer: B
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Page 3
Chapter 2: Analyzing Transactions
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212 Verified Questions
212 Flashcards
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Sample Questions
Q1) The normal balance of an expense account is a credit.
A)True
B)False
Answer: False
Q2) On June 1,the cash account balance was $96,750.During June,cash receipts totaled $305,000 and the June 30 balance was $75,880.Determine the cash payments made during June.
Answer: 75,880 = 96,750 + 305,000 - ?
Cash payments = $325,870
Q3) Liabilities are increased with debits and decreased with credits.
A)True
B)False
Answer: False
Q4) On November 30th,it was discovered that a $550 of a transaction recording the purchase of office supplies was really office equipment.Prepare the journal entry to correct this situation.
Answer: 11ea906a_d1c4_cc90_aec7_9b69a0e5d4ba_TB2051_00
Q5) Prepare a journal entry on October 12 for the fees earned on account,$14,600.
Answer: 11ea906a_d1c4_575a_aec7_59d824a6a683_TB2051_00
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Chapter 3: The Adjusting Process
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168 Verified Questions
168 Flashcards
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Sample Questions
Q1) On January 31,the end of the first month of the year,the usual adjusting entry transferring expired insurance to an expense account was omitted.Which items will be incorrectly stated because of the error on (a)the income statement for January and (b)the balance sheet as of January 31? Also indicate whether the items in error will be overstated or understated.
Answer: 11ea906a_d1cd_7f84_aec7_4d16acf42b07_TB2051_00
Q2) The general term used to indicate delaying the recognition of an expense already paid or of a revenue already received is
A)depreciation
B)deferral
C)accrual
D)inventory
Answer: B
Q3) Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned.
A)True
B)False
Answer: True
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Chapter 4: Completing the Accounting Cycle
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192 Flashcards
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Sample Questions
Q1) The last step of the accounting cycle is to prepare a post-closing trial balance.
A)True
B)False
Q2) Land is an example of a plant asset.
A)True
B)False
Q3) After analyzing transactions,the next step would be to post the transactions in the ledger.
A)True
B)False
Q4) The journal entry to close the Fees Earned,$750,and Rent Revenue,$175,accounts on December 31st during the closing process would be:
A)Dec.31 Fees Earned 750 Rent Revenue 175 Income Summary 925
B)Dec.31 Income Summary 925 Fees Earned 750 Rent Revenue 175
C)Dec.31 Revenues 575 Income Summary 575
D)Dec.31 Income Summary 925 Revenues 925
Q5) Explain how net income or loss is determined by using the work sheet.
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Chapter 5: Accounting for Merchandising Businesses
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217 Verified Questions
217 Flashcards
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Sample Questions
Q1) On March 4th,Micro Sales makes $4,850.00 in sales on bank credit cards which charge a 2.5% service charge and deposit the funds into Micro Sales bank accounts at the end of the business day.Journalize the sales and recognition of expense.
Q2) In the periodic inventory system,purchases of merchandise for resale are debited to the Purchases account.
A)True
B)False
Q3) Taking advantage of a 2/10,n/30 purchases discount is equal to a savings yearly rate of approximately
A)2%
B)24%
C)20%
D)36%
Q4) Inventory shortage is recorded when
A)merchandise is returned by a buyer.
B)merchandise purchased from a seller is incomplete or short.
C)merchandise is returned to a seller.
D)there is a difference between a physical count of inventory and inventory records.
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Chapter 6: Inventories
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163 Flashcards
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Sample Questions
Q1) All of the following are reasons to use an estimated method of costing inventory except:
A)Perpetual inventory records are not maintained.
B)Purchase records are not maintained.
C)A disaster has destroyed the inventory records and the inventory.
D)Interim financial statements are required but physical inventory is only taken at the end of the financial accounting period.
Q2) Which of the following companies would be more likely to use the specific identification inventory costing method?
A)Gordon's Jewelers
B)Lowe's
C)Best Buy
D)Wal-Mart
Q3) Merchandise inventory at the end of the year is overstated.Which of the following statements correctly states the effect of the error?
A)owner's equity is overstated
B)cost of merchandise sold is overstated
C)gross profit is understated
D)net income is understated
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Page 8
Chapter 7: Sarbanes-Oxley, internal Control, and Cash
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175 Verified Questions
175 Flashcards
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Sample Questions
Q1) In preparing a bank reconciliation,the amount of deposits in transit is deducted from the balance per bank statement.
A)True
B)False
Q2) An example of good internal controls over cash payments is the taking of all cash discounts offered.
A)True
B)False
Q3) Money orders are considered cash.
A)True
B)False
Q4) The term cash includes
A)coins,currency (paper money),checks
B)money orders,and money on deposit that is available for unrestricted withdrawal
C)short-term receivables
D)both a and b
Q5) List the principal advantage of Electronic Funds Transfers.
Q6) List and define each of the five elements of internal control.
Q7) Why would a bank require a company to maintain a compensating balance?
Page 9
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Chapter 8: Receivables
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Sample Questions
Q1) The balance of the Allowance for Doubtful Accounts is added to Accounts Receivable on the balance sheet.
A)True
B)False
Q2) The number of days' sales in receivables is an estimate of the length of time the accounts receivables have been outstanding.
A)True
B)False
Q3) Allowance for Doubtful Accounts has a debit balance of $1,100 at the end of the year (before adjustment),and an analysis of customers' accounts indicates uncollectible receivables of $12,900.Which of the following entries records the proper adjustment for Bad Debt Expense?
A)debit Bad Debt Expense,$14,000;credit Allowance for Doubtful Accounts,$14,000
B)debit Allowance for Doubtful Accounts,$14,000;credit Bad Debt Expense,$14,000
C)debit Allowance for Doubtful Accounts,$11,800;credit Bad Debt Expense,$11,800
D)debit Bad Debt Expense,$11,800;credit Allowance for Doubtful Accounts,$11,800
Q4) The due date of a 60-day note dated July 10 is September 10.
A)True B)False
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Chapter 9: Fixed Assets and Intangible Assets
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174 Flashcards
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Sample Questions
Q1) An operating lease is accounted for as if the lessee has purchased the asset.
A)True
B)False
Q2) When the amount of use of a fixed asset varies from year to year,the method of determining depreciation expense that best matches allocation of cost with revenue is
A)declining-balance
B)straight-line
C)units-of-production
D)MACRS
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) Capital expenditures are costs of acquiring,constructing,adding,or replacing property,plant and equipment.
A)True
B)False
Q5) A machine costing $57,000 with a 6-year life and $54,000 depreciable cost was purchased January 1,2015.Compute the yearly depreciation expense using straight-line depreciation.
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Chapter 10: Current Liabilities and Payroll
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171 Verified Questions
171 Flashcards
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Sample Questions
Q1) An employee receives an hourly rate of $27,with time and a half for all hours worked in excess of 40 during a week.Payroll data for the current week are as follows: hours worked,46;federal income tax withheld,$350;cumulative earnings for year prior to current week,$99,700;social security tax rate,6.0% on maximum of $100,000;and Medicare tax rate,1.5% on all earnings.What is the net amount to be paid to the employee?
A)$713.75
B)$935.15
C)$764.75
D)$873.77
Q2) A loan in which the lender deducts interest from the amount borrowed before the money is advanced to the borrower is called an interest bearing note.
A)True
B)False
Q3) Taxes deducted from an employee's earnings to finance social security and Medicare benefits are called FICA taxes.
A)True
B)False
Q4) 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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169 Verified Questions
169 Flashcards
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Sample Questions
Q1) The term deficit is used to refer to a debit balance in which of the following accounts of a corporation?
A)Retained Earnings
B)Treasury Stock
C)Organizational Expenses
D)Common Stock
Q2) A restriction/appropriation of retained earnings
A)decreases total assets
B)increases total retained earnings
C)decreases total retained earnings
D)has no effect on total retained earnings
Q3) A corporation purchased 1,000 shares of its $5 par common stock at $10 and subsequently sold 500 of the shares at $20.What is the amount of revenue realized from the sale?
A)$0
B)$5,000
C)$2,500
D)$10,000
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Chapter 12: Long-Term Liabilities: Bonds and Notes
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183 Flashcards
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Sample Questions
Q1) When the effective interest method of amortization is used,the amount of interest expense for a given period is calculated by multiplying the face rate of interest by the bond's carrying value at the beginning of the given period.
A)True
B)False
Q2) Sinking Fund Investments would be classified on the balance sheet as
A)a current asset
B)a fixed asset
C)an investment
D)a deferred debit
Q3) The concept of present value is that an amount of cash to be received at some date in the future is the equivalent of the same amount of cash held at an earlier date.
A)True
B)False
Q4) If bonds payable are not callable,the issuing corporation
A)can exchange it for common stock
B)can repurchase them in the open market
C)must get special permission from the SEC to repurchase them
D)is more likely to repurchase them if the interest rates increase
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Chapter 13: Investments and Fair Value Accounting
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Sample Questions
Q1) The amortization of discounts or premiums are recorded as part of interest income on the income statement.
A)True B)False
Q2) Investments in stocks that are expected to be held for the long term are listed in the stockholders' equity section of the balance sheet.
A)True B)False
Q3) Newville Corporation reported net income of $50,000 in 2015.They have 10,000 shares of $100 par,6% preferred stock and 50,000 shares of $2 common stock outstanding.During 2012 Newville paid the preferred stockholder's a $6 per share dividend and also paid $30,000 to common shareholders.The market value of Newville's stock is: Preferred - $105 and Common - $10.
(1)Calculate Newville's dividend yield.
(2)Why does the dividend yield vary widely across firms?
Q4) Pepito Company purchased 40% of the outstanding stock of Reyes Company on January 1,2012.Reyes reported net income of $75,000 and declared dividends of $15,000 during 2012.How much would Pepito adjust their investment in Reyes Company under the equity method?
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Chapter 14: Statement of Cash Flows
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159 Flashcards
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Sample Questions
Q1) The statement of cash flows is not useful for:
A)planning future investing and financing activities
B)determining a company's ability to pay its debts
C)determining a company's ability to pay dividends
D)calculating the net worth of a company
Q2) On the statement of cash flows,the cash flows from financing activities section would include
A)receipts from the sale of investments
B)payments for the acquisition of investments
C)receipts from a note receivable
D)receipts from the issuance of capital stock
Q3) A corporation uses the indirect method for preparing the Statement of Cash Flows.A fixed asset has been sold for $25,000 representing a gain of $4,500.The value in the operating activities section regarding this event would be:
A)$25,000
B)($4,500)
C)$29,500
D)$4,500
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16
Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) When a company changes from one acceptable accounting method to another,the change is reported
A)in the statement of retained earnings,as a correction to the beginning balance.
B)in the income statement,below income from continuing operations.
C)in the income statement,above income from continuing operations
D)through a retroactive restatement of prior period earnings.
Q2) When the rate of return on total assets ratio is greater than the rate of return on common stockholders' equity ratio,the management of the company has effectively used leverage.
A)True
B)False
Q3) An increase in the accounts receivable turnover may be due to an improvement in the collection of receivables or to a change in the granting of credit and/or in collection practices.
A)True
B)False
Q4) In horizontal analysis,the current year is the base year.
A)True
B)False
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