Accounting I Final Test Solutions
Course Introduction
Accounting I provides an introduction to the fundamental principles and procedures of financial accounting. Students will explore topics such as the accounting cycle, preparing financial statements, recording transactions, and understanding the role of accounting in business decision-making. Emphasis is placed on analyzing and interpreting financial information, maintaining accurate records, and applying generally accepted accounting principles (GAAP). This course serves as a foundation for more advanced studies in accounting and finance.
Recommended Textbook
Financial Accounting 5th Canadian Edition by Walter T. Harrison
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13 Chapters
1520 Verified Questions
1520 Flashcards
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Chapter 1: The Financial Statements
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139 Verified Questions
139 Flashcards
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Sample Questions
Q1) The accounting concept that maintains that each organization or section of an organization stands apart from other organizations and individuals is known as the:
A) reliability principle
B) going-concern assumption
C) entity assumption
D) monetary unit assumption
Answer: C
Q2) Revenues are increases in retained earnings from the delivery of goods or services.
A)True
B)False
Answer: True
Q3) The three forms of business organizations are sole proprietorships, partnerships, and non-profit organizations.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Recording Business Transactions
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) A ledger is the first place where transactions are recorded in the accounting system.
A)True
B)False
Answer: False
Q2) The normal balance of a revenue account is a ________ because revenues increase ________.
A) debit, assets
B) debit, dividends
C) credit, liabilities
D) credit, shareholders' equity
Answer: D
Q3) Which of the following statements regarding accounts is false?
A) An asset is increased by a debit and decreased by a credit.
B) Revenue is increased by a debit and an expense is increased by a credit.
C) A liability is decreased by a debit and increased by a credit.
D) Revenue is increased by a credit and an expense is increased by a debit.
Answer: B
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Chapter 3: Accrual Accounting and the Financial Statements
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) Blitz Limited has recently hired a junior accountant. The accountant noticed that his predecessor had made several mistakes in recording transactions during the most recent fiscal year. For each of the following situations, prepare the adjusting entry that should be made to correct the error.
1. Blitz received a $15,000 advance from a client for work that is going to be completed in the next year. The bookkeeper debited cash and credited revenue.
2. Blitz purchased a new piece of equipment at a cost of $36,000. At the time of purchase, the equipment was debited to repairs and maintenance expense. The equipment is expected to have a useful life of 10 years. Blitz uses straight-line depreciation. Assume that the equipment had been in use for a full year.
3. During the year Blitz declared $5,000 in dividends. The bookkeeper had recorded this payment as a debit to dividends expense and a credit to cash. Answer:
11ea84f5_9cea_d196_9a63_c78309ce4a8f_TB4002_00_TB4002_00_TB4002_00
11ea84f5_9cea_f8a7_9a63_43ac79750ec5_TB4002_00_TB4002_00_TB4002_00
11ea84f5_9cea_f8a8_9a63_b9857254cbfe_TB4002_00_TB4002_00_TB4002_00
11ea84f5_9cea_f8a9_9a63_a73d7088a0f5_TB4002_00_TB4002_00_TB4002_00
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Chapter 4: Internal Control and Cash
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Outstanding cheques are deposits you have recorded but the bank has not.
A)True
B)False
Q2) Identify and briefly describe the process of preparing a cash budget and how this information can be used for planning purposes.
Q3) Business risks are risks that companies will not achieve its objectives.
A)True
B)False
Q4) Which of the following items below may be made to reconcile a book balance to a bank balance?
A) a deposit in transit
B) an EFT receipt
C) outstanding cheques
D) an addition or subtraction to correct a bank error, as appropriate
Q5) In a bank reconciliation, an EFT cash payment is:
A) deducted from the bank balance in the general ledger
B) added to the bank balance in the general ledger
C) deducted from the bank balance on the bank statement
D) added to the bank balance on the bank statement
Q6) Differentiate between the role of an external and internal auditor.
Page 6
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Chapter 5: Short-Term Investments and Receivables
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Receivables are monetary claims against others.
A)True
B)False
Q2) Factoring receivables involves selling them at a discounted price.
A)True
B)False
Q3) Many companies use both the percentage-of-sales and the aging method to establish their allowance for doubtful accounts.
A)True
B)False
Q4) Which of the following are excluded from the numerator in the calculation of the acid-test ratio?
A) inventory and accounts receivable
B) prepaid expenses and cash
C) inventory and prepaid expenses
D) inventory and short-term investments
Q5) The payee of the note records interest on a note receivable as interest expense.
A)True
B)False
Q6) What are 'held-for-trading investments'?
Page 7
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Chapter 6: Inventory and Cost of Goods Sold
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) If ending inventory on December 31, 2013, is overstated, then:
A) cost of goods sold for the year ended December 31, 2014, will be understated
B) cost of goods sold for the year ended December 31, 2013, will be overstated
C) gross margin for the year ended December 31, 2013, will be understated
D) gross margin for the year ended December 31, 2014, will be understated
Q2) Cash received from the sale of inventory is shown on a cash flow statement as:
A) an investing activity
B) a financing activity
C) an operating activity
D) either an operating activity or a financing activity
Q3) A purchase allowance is a decrease in the cost of purchases because the purchaser returned goods to the supplier.
A)True
B)False
Q4) In a merchandising business, gross margin is the difference between sales revenue and the cost of goods sold.
A)True
B)False
Q5) What is the major expense shown on the income statement for a merchandising business?
Page 8
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Chapter 7: Property, Plant, and Equipment, and Intangible Assets
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) The cost of a tangible long-lived asset includes the purchase price, applicable taxes, purchase commissions, and all other amounts paid to acquire the asset and get it ready for its intended use.
A)True
B)False
Q2) Amortization of an intangible asset is similar to which amortization method?
A) CCA amortization
B) units-of-production
C) double-declining-balance
D) straight-line
Q3) Which accounting principle directs the depreciation process?
A) historical cost
B) going concern
C) full disclosure
D) matching
Q4) Which of the following is not an intangible asset?
A) Copyright
B) Patent
C) Leasehold improvement
D) Trademark
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Chapter 8: Long-Term Investments and the Time Value of Money
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Sample Questions
Q1) Why is understanding the extent to which ATCO Ltd. influences another company important for accounting purposes? What impact does the degree of influence ATCO Ltd. has over another company have on accounting?
Q2) The journal entry to record the receipt of a cash dividend will include a credit to Retained Earnings.
A)True
B)False
Q3) A gain or loss on sale of a long-term investment using the equity method is determined by comparing the cash received with the:
A) cost of the long-term investment
B) market value of the long-term investment
C) cost of the long-term investment adjusted for the investor's share of the investee's net income and cash dividends while the investment was held by the investor company
D) lower-of-cost-or-market value of the long-term investment
Q4) Non-controlling interest occurs when a company owns only 90% of a company they control.
A)True
B)False
Page 10
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Chapter 9: Liabilities
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Sample Questions
Q1) On January 1, 2013, JetNew, issued $1,000,000 face value, 5-year bonds with a stated rate of 5% at an effective rate of 4% which brought in $1,044,913. Interest is paid semi-annually on July 1 and December 31. JetNew uses the effective-interest method of amortization.
Prepare entries for the following transactions:
a. Issuance of the bonds on January 1, 2013.
b. Payment of interest and amortization of discount or premium on July 1, 2013.
Q2) Revaluation Magazine receives $90 in advance from a customer for a 3-year subscription. Revaluation Magazine's entry to record this transaction would include:
A) debit to Unearned Subscription Revenue for $90
B) credit to Unearned Subscription Revenue for $90
C) debit to Subscription Revenue for $90
D) credit to Subscription Revenue for $90
Q3) Under the effective-interest method of amortization, the cash payment on each interest payment date will:
A) remain the same for each interest period
B) decrease if bonds are issued at a premium
C) increase if bonds are issued at par
D) increase if bonds are issued at a discount
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Page 11
Chapter 10: Shareholders Equity
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110 Flashcards
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Sample Questions
Q1) Passed dividends on cumulative preferred shares:
A) are a liability until paid and may turn into a long-term liability with the passage of time
B) are lost forever by the preferred shareholders
C) must be paid by January 1 of the following year by law
D) are referred to as dividends in arrears
Q2) The board of directors elects the chairperson of a corporation.
A)True
B)False
Q3) If a corporation issues only one class of shares, it must be:
A) par value
B) preferred
C) common
D) common or preferred
Q4) Which of the following is not a characteristic that distinguishes corporations from proprietorships and partnerships?
A) Corporations are separate legal entities apart from the owners.
B) Corporate earnings are subject to double taxation.
C) Corporations have mutual agency.
D) Corporations have continuous lives regardless of changes in ownership.
Page 12
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Shareholders Equity
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Sample Questions
Q1) All of the following might be found on a statement of shareholders' equity except:
A) earnings-per-share information
B) cash dividends
C) repurchased share purchases
D) net income
Q2) The amount of cash dividends declared during the period and the amount of cash dividends paid during the period are reflected in the statement of shareholders' equity and the cash flow statement, respectively.
A)True
B)False
Q3) Operating income excludes income from discontinued operations.
A)True
B)False
Q4) Under IFRS, when income tax payable exceeds income tax expense:
A) Accumulated Income Tax is debited
B) Prepaid Income Tax is credited
C) Deferred Tax Liability is credited
D) Deferred Tax Asset is debited
Q5) Outline the criteria required for revenue recognition. Page 13
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Page 14
Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) A gain on sale of capital assets is added to net income when preparing the operating activities section of a statement of cash flows under the indirect method.
A)True
B)False
Q2) Cash equivalents would include money market accounts, Canadian Treasury bills, and notes receivable.
A)True B)False
Q3) The purchase of land for cash and the sale of a capital asset are viewed as:
A) a negative and positive item on the statement of cash flows
B) a positive and negative item on the statement of cash flows
C) both positive items on the statement of cash flows
D) neither positive nor negative items on the statement of cash flows
Q4) Why is the statement of cash flows of interest to investors, creditors, and management?
Q5) Non cash activities such as an exchange of shares for a piece of equipment do not need to be disclosed.
A)True
B)False
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Chapter 13: Financial Statement Analysis
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116 Flashcards
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Sample Questions
Q1) The times-interest-earned ratio is calculated as:
A) income from operations / interest expense
B) net income / interest expense
C) net income after taxes + interest expense/interest expense
D) income from operations - interest expense/interest expense
Q2) A company reported $75,000 of income for 2012, $80,000 for 2013, and $90,000 for 2014. The percentage change in net income from 2013 to 2014 was:
A) 9.1%
B) 11.1%
C) 12.5%
D) 16.7%
Q3) Total revenues and net income for 2013 for Tiger-Cat Corporation is $3,000,000 and $200,000, respectively. Tiger-Cat Corporation has had 400,000 common shares of stock outstanding for all of 2013. The selling price of Tiger-Cat Corporation common shares on December 31, 2013, is $15. Earnings per share for 2013 is:
A) $30.00
B) $7.50
C) $7.00
D) $0.50
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Page 16