Introduction to Financial Accounting Practice Exam
Course Introduction
Introduction to Financial Accounting provides students with a foundational understanding of the principles and practices involved in recording, summarizing, and reporting financial transactions of organizations. The course covers essential topics such as the accounting cycle, preparation and analysis of financial statements, and the application of generally accepted accounting principles (GAAP). By exploring real-world scenarios and case studies, students will develop critical thinking and problem-solving skills necessary for interpreting financial information, supporting effective business decisions, and ensuring regulatory compliance in various types of organizations.
Recommended Textbook
Introduction to Financial Accounting 11th Edition by Charles T. Horngren
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12 Chapters
1592 Verified Questions
1592 Flashcards
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Page 2
Chapter 1: Accounting: the Language of Business
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) A transaction affects the financial position of an entity and can be reliably recorded in terms of money.
A)True
B)False
Answer: True
Q2) Notes Payable are classified as
A)equity.
B)assets.
C)owner investments.
D)liabilities.
E)expenses.
Answer: D
Q3) Accounting does not provide information that is useful in making decisions that have economic consequences.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Measuring Income to Assess Performance
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) The following data pertains to Greenwold Manufacturing.Total assets at January 1,20X9,were $290,000; at December 31,20X9,total assets were $334,000.During 20X9,sales were $995,000; cash dividends declared were $10,000; and operating expenses (exclusive of cost of goods sold)were $545,000.Total liabilities at December 31,20X9,were $128,000; at January 1,20X9,total liabilities were $105,000.There was no additional paid-in capital during 20X9.What was the amount of stockholders' equity as of January 1,20X9?
A)$450,000
B)$440,000
C)$185,000
D)$635,000
E)$175,000
Answer: C
Q2) Net income is defined as
A)revenues minus expenses.
B)expenses minus revenues.
C)assets minus revenues.
D)assets plus revenues.
E)owners' equity assets minus expenses.
Answer: A
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Page 4
Chapter 3: Recording Transactions
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126 Verified Questions
126 Flashcards
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Sample Questions
Q1) Posting is the transferring of amounts from the journal to the appropriate accounts in the ledger.
A)True
B)False
Answer: True
Q2) Altoon Manufacturing's records were partially destroyed in a flood.The company does not know what sales have been for the year,but it does know all sales were on account.Also,the beginning accounts receivable balance was $19,000,and its accounts receivable balance at the time of the flood was $25,000.From the beginning of the year until the flood,cash collections from credit customers were $158,000.Given this information,what are Altoon Manufacturing's sales for the year until the flood?
A)$164,000
B)$114,000
C)$202,000
D)$209,000
E)$189,000
Answer: A
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Page 5
Chapter 4: Accrual Accounting and Financial Statements
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126 Verified Questions
126 Flashcards
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Sample Questions
Q1) Which of the following is an example of an accrual of unrecorded revenues?
A)Interest accrues each month,but is paid quarterly.
B)Office supplies are purchased each month,but the account is not adjusted until the end of the month.
C)Wages have been earned,but have not been paid at the end of the month.
D)An attorney has performed work for a client,but has not billed the client yet.
E)Equipment purchased will be beneficial for several years.
Q2) An example of an explicit transaction is
A)depreciation expense.
B)expiration of prepaid rent.
C)accrual of interest payable.
D)accrual of wages payable.
E)purchasing inventory on account.
Q3) The adjustment for revenue received in advance,which has been earned in the current period,involves a
A)debit to unearned revenue.
B)debit to accrued revenue.
C)credit to accrued revenue.
D)debit to cash.
E)credit to cash.
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Chapter 5: Statement of Cash Flows
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128 Verified Questions
128 Flashcards
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Sample Questions
Q1) Which of the following transactions increase cash?
1)Convert debt to common stock
2)Credit sales
3)Increase long-term debt
4)Issue common stock
A)1 and 3
B)2 and 4
C)3 and 4
D)1,2,and 4
E)1,2,3,and 4
Q2) Increases in liabilities,owners' equity,and noncash assets increase cash.
A)True
B)False
Q3) When an increase in cash occurs,it ensues from
A)increases in assets.
B)increases in liabilities.
C)increases in paid-in-capital.
D)both A and B
E)both B and C
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Page 7
Chapter 6: Accounting for Sales
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132 Verified Questions
132 Flashcards
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Sample Questions
Q1) Revenue is generally recognized at the point of sale with a debit.
A)True
B)False
Q2) Our House is a manufacturer of furniture.On June 16,20X9,Our House received an order from Old Fashioned,Inc.,for 15 living room sets at $1,500 per set.The furniture was delivered by Our House to Old Fashioned,Inc.,on June 30,20X9,at which time Our House billed Old Fashioned under the terms 2/30,n/60.Old Fashioned,Inc.,paid Our House on July 25.Assume Our House uses a periodic inventory system. Prepare the appropriate journal entries for Our House as of the following dates:
a.June 16
b.June 30
c.July 25
Q3) The goal of the internal control that calls for adequate documentation is the immediate,complete,and tamper-proof recording of all transactions.
A)True
B)False
Q4) Audit committees perform the internal audits of a company.
A)True
B)False
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Chapter 7: Inventories and Cost of Goods Sold
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Assuming inflation,if a company wanted to maximize net income,it would select which of the following inventory valuation methods?
A)FIFO
B)LIFO
C)Weighted-average
D)The selection of an inventory valuation method does not affect the net income.
E)Specific identification
Q2) When inventory prices are rising,the ending inventory balance reported on a LIFO basis is generally
A)lower than on a FIFO basis.
B)equal to a FIFO basis.
C)greater than on a FIFO basis.
D)equal to a weighted-average basis.
E)greater than a weighted-average basis.
Q3) Under a periodic inventory system,a business maintains a continual record of inventory on hand.
A)True
B)False
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9
Chapter 8: Long-Lived Assets
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152 Flashcards
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Sample Questions
Q1) Which statement is FALSE?
A)The economic life of an intangible asset does not always equal its legal life.
B)The cost of developing an intangible asset internally is capitalized as an asset.
C)Intangible assets are similar to fixed assets,in that their acquisition costs are capitalized as assets,and this cost is expensed over their estimated useful lives.
D)Intangible assets are long-lived assets that are not physical in nature.
E)Examples of intangible assets include patents,copyrights,and goodwill.
Q2) Accounting for changes in residual value must be prospective and retrospective.
A)True
B)False
Q3) The depreciable value is the difference between the total acquisition cost and the predicted residual value.
A)True
B)False
Q4) Depreciation is not intended to track the decreasing current market value of a tangible asset.
A)True
B)False
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10
Chapter 9: Liabilities and Interest
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196 Verified Questions
196 Flashcards
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Sample Questions
Q1) A line of credit is a written promise to repay the loan principal plus interest at a specific future date.
A)True
B)False
Q2) For the week ended May 16,Cheap Printing Company had a total payroll of $183,000.Three items are withheld from employee's paychecks: (1)Social Security (FICA)tax of 7.1% of payroll; (2)income taxes,which average 20% of the payroll; and (3)employees' savings that are deposited in their credit union,which are $12,020.In addition,Cheap Printing Company pays (1)Social Security tax equal to the amount withheld from employees,(2)health insurance premiums of $12,750,and (3)contributions to the employees' pension fund of $17,000.
Prepare the journal entries to record the compensation expense and the employee benefit expense.
Q3) Generally bonds are called at an amount above par,referred to as a call discount.
A)True
B)False
Q4) Define a "restructuring," give two examples,and explain the liabilities that may result from such an activity.
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Page 11
Chapter 10: Stockholders Equity
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117 Flashcards
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Sample Questions
Q1) The account Dividends Payable is
A)debited on the date of declaration.
B)credited on the date of payment.
C)not a legal liability of the company.
D)a liability on a balance sheet prepared between the date of declaration and the date of payment.
E)a contra account found in the stockholders' equity section of the balance sheet.
Q2) A market value well above book value may be appropriate for a company if it has many unrecorded assets.
A)True
B)False
Q3) A corporate proxy is a written authority granted by individual shareholders to others to cast the shareholders' votes.
A)True
B)False
Q4) A stock split can be accounted for as a large stock dividend.
A)True
B)False
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Page 12
Chapter 11: Intercorporate Investments and Consolidations
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Marketable securities are notes,bonds,or stocks that can be readily sold on stock exchanges or over-the-counter markets.
A)True
B)False
Q2) Palatino Ranchers acquired a $300,000 15-year,10% callable bond on January 1,20X9,for cash of $258,702.The bond was acquired at a price to yield 12%.The bond pays interest every June 30 and December 31.On December 31,20X9,after interest had been received,the bond owned by Palatino Ranchers was called at a price of 101 (101% of face value).Assume the company intends to hold the bond until maturity and the company uses the effective interest method of discount or premium amortization. Prepare the appropriate journal entry for each of the following events:
a.The purchase of the bond on January 1,20X9
b.The receipt of the June 30,20X9,interest payment
c.The receipt of the December 31,20X9,interest payment
d.The bond being called on December 31,20X9
Q3) List and explain why a company would create subsidiaries instead of integrating the smaller companies into the larger parent to create a single entity.
Q4) Describe spin-offs including the benefits to spinning off a segment.
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Page 13
Chapter 12: Financial Statement Analysis
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) ROE = Return on sales × Total asset turnover × Financial Leverage.
A)True
B)False
Q2) Long-term solvency refers to an organization's ability to meet current payments as they become due.
A)True
B)False
Q3) Manchester Technology has the following data available: \(\begin{array}{l}
\text {Accounts Receivable, December 31,2013} & \$ 220 \\
\text {Accounts Receivable, December 31, 2012} & \$100 \\
\end{array}\)
What is the percentage increase or (decrease)in accounts receivable from 2012 to 2013 for Manchester Technology?
A)(120.0)%
B)(54.5)%
C)27.3%
D)54.5%
E)120.0%
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