Financial Reporting Exam
Bank
Course Introduction
Financial Reporting is a comprehensive course that introduces students to the concepts, principles, and procedures used in preparing financial statements for external users. The course covers the frameworks and standards such as International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) that govern financial reporting, and emphasizes the analysis and interpretation of income statements, balance sheets, cash flow statements, and statements of changes in equity. Students develop a deep understanding of the role of financial reporting in business decision-making, the importance of ethics and transparency, and the impact of global environments on the reporting process. Through case studies and practical exercises, students enhance their ability to critically evaluate financial statements and communicate findings to stakeholders.
Recommended Textbook
Financial and Managerial Accounting 11th Edition by Carl S. Warren
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15 Chapters
2679 Verified Questions
2679 Flashcards
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Page 2
Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) What is the major difference between the objective of financial accounting and the objective of managerial accounting?
Answer: The objective of financial accounting is to provide information for the decision-making needs of external users. The objective of managerial accounting is to provide information for internal users.
Q2) How does receiving a bill to be paid next month for services rendered affect the accounting equation?
A) assets decrease; stockholders' equity decreases
B) assets increase; liabilities increase
C) liabilities increase; stockholders' equity increases
D) liabilities increase; stockholders' equity decreases
Answer: D
Q3) Which of the following is not an asset?
A) investments
B) cash
C) inventory
D) owner's equity
Answer: D
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Chapter 2: Analyzing Transactions
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222 Flashcards
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Sample Questions
Q1) A patient has a physical examination and asks the bookkeeper to mail the bill. The bookkeeper should
A) make no entry until the cash is received
B) Cash, debit; Accounts Receivable, credit
C) Cash, debit; Fees Earned, credit
D) Accounts Receivable, debit; Fees Earned, credit
Answer: D
Q2) Office supplies were sold by Ari's Alarm Service at cost to another repair shop, with cash received. Which of the following entries for Ari's Alarm Service records this transaction?
A) Office Supplies, debit; Cash, credit
B) Office Supplies, debit; Accounts Payable, credit
C) Cash, debit; Office Supplies, credit
D) Accounts Payable, debit; Office Supplies, credit
Answer: C
Q3) Liability accounts are increased by debits.
A)True
B)False
Answer: False
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Page 4
Chapter 3: The Adjusting Process
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179 Flashcards
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Sample Questions
Q1) 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
Q2) The financial statements are prepared from the unadjusted trial balance.
A)True
B)False
Answer: False
Q3) On March 1, a business paid $3,600 for a twelve month liability insurance policy. On April 1 the same business entered into a two-year rental contract for equipment at a total cost of $18,000. Determine the following amounts:
Answer: (a) insurance expense for the month of March
(b) prepaid insurance as of March 31
(c) equipment rent expense for the month of April
(d) prepaid equipment rental as of April 30
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Page 5
Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) A post-closing trial balance should be prepared before the financial statements are prepared.
A)True
B)False
Q2) After all of the account balances have been extended to the Balance Sheet columns of the work sheet, the totals of the debit and credit columns show debits of $36,678 and the credits of $41,101. This indicates that A) neither net income or loss can be calculated because it is found on the income statement
B) the company has a net loss of $4,423 for the period
C) the company has a net income of $4,423 for the period
D) The amounts are out of balance and need to be corrected
Q3) Which of the following accounts will not be closed to Income Summary at the end of the fiscal year?
A) Salaries Expense
B) Fees Earned
C) Unearned Rent
D) Depreciation Expense
Q4) 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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221 Flashcards
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Sample Questions
Q1) On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.
A)True
B)False
Q2) Other income and expenses are items that are related to the primary operating activity.
A)True
B)False
Q3) Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a
A) credit to Sales Returns and Allowances
B) debit to Merchandise Inventory
C) credit to Merchandise Inventory
D) debit to Cost of Merchandise Sold
Q4) Net sales is equal to sales minus cost of merchandise sold.
A)True
B)False
Q5) Selected accounts and amounts appear below. Journalize the closing entry, assuming a perpetual inventory system.
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Chapter 6: Inventories
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Sample Questions
Q1) When merchandise inventory is shown on the balance sheet, both the method of determining the cost of the inventory and the method of valuing the inventory should be shown.
A)True
B)False
Q2) The inventory method that assigns the most recent costs to cost of goods sold is
A) FIFO
B) LIFO
C) average
D) specific identification
Q3) Cost flow is in the reverse order in which costs were incurred when using A) weighted average
B) last-in, first-out
C) first-in, first-out
D) average cost
Q4) During periods of increasing costs, the use of the FIFO method of costing inventory will yield an inventory amount for the balance sheet that is higher than LIFO would produce.
A)True
B)False
Page 8
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Chapter 7: Sarbanes-Oxley, Internal Control, and Cash
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174 Flashcards
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Sample Questions
Q1) The bank reconciliation is an important part of the system of internal controls.
A)True
B)False
Q2) Consider the cash account below.
Additional Information: Cash disbursements were 75% of collections. \(\begin{array}{|l|l|}
\hline \text { Cash } & \\
\hline \text { Beg. Balance } & ? ? \\
\hline \text { Collections } & 110,257.76 \\
\hline \text { Disbursements } & ? ? \\
\hline \text { EndBalance } & 112,567.43 \\
\hline & \\
\hline
\end{array}\) How much was the beginning balance of the cash account?
Q3) Procedures designed to protect cash from theft and misuse from the time it is received until it can be deposited in a bank are called
A) accounting controls
B) cash controls
C) preventive controls
D) detective controls
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Chapter 8: Receivables
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Sample Questions
Q1) Stephanie Roe utilizes the direct write-off method of accounting for uncollectible receivables. On September 15th she is notified by the attorneys for Jacob Marley that Jacob Marley is bankrupt and no cash is expected in the liquidation of Jacob Marley. Write off the $675 of accounts receivable due Jacob Marley.
Q2) Discuss the similarities and differences between accounts receivables, notes receivables and other receivables.
Q3) Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts
A) Liabilities decrease.
B) Net Income is unchanged.
C) Total Assets are unchanged.
D) Total Assets decrease.
Q4) Fellows Corporation has determined that the $1,500 accounts receivable due from Andrew Stevens is uncollectible. Compare the journal entry that is required under the direct write-off method to the journal entry that is required using the allowance method.
Q5) Discuss the (1) focus and (2) financial statement emphasis of (a) the percent of sales and (b) the analysis of receivables methods of estimating bad debts.
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Page 10
Chapter 9: Fixed Assets and Intangible Assets
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Sample Questions
Q1) When land is purchased to construct a new building, the cost of removing any structures on the land should be charged to the building account.
A)True
B)False
Q2) The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called
A) depletion
B) deferral
C) amortization
D) depreciation
Q3) Equipment was purchased on January 5, 2011, at a cost of $90,000. The equipment had an estimated useful life of 8 years and an estimated residual value of $8,000.
Q4) Both the initial cost of the asset and the accumulated depreciation will be taken off the books with the disposal of the asset.
A)True
B)False
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11
Chapter 10: Current Liabilities and Payroll
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Sample Questions
Q1) During September, Excom sold 100 radios for $50 each. Each radio cost Excom $30 to purchase, and carried a two-year warranty. If 5% typically need to be replaced over the warranty period and one is actually replaced during September, for what amount in September would Excom debit Product Warranty Expense?
A) $50
B) $150
C) $30
D) $120
Q2) Which of the following taxes would be deducted in determining an employee's net pay?
A) FUTA taxes
B) SUTA taxes
C) FICA taxes
D) all of the above
Q3) Form W-2 is called the Wage and Tax Statement.
A)True
B)False
Q4) Federal unemployment taxes are paid by the employer and the employee. A)True B)False
Page 12
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Chapter 11: Corporations: Organization, Stock Transactions, and Dividends
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Sample Questions
Q1) Double taxation is a disadvantage of a corporation because the same party has to pay taxes twice on the income.
A)True
B)False
Q2) Before a stock dividend can be declared or paid, there must be sufficient cash.
A)True
B)False
Q3) A corporation has 12,000 shares of $20 par value stock outstanding that has a current market value of $150. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately $50.
A)True
B)False
Q4) When no-par stock is issued, the Common Stock account is credited for the selling price of the stock issued.
A)True
B)False
Q5) For accounting purposes, stated value is treated the same way as par value.
A)True
B)False
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Chapter 12: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) A corporation issues for cash $2,000,000 of 8%, 15-year bonds, interest payable annually, at a time when the market rate of interest is 7%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?
A) The carrying amount increases from its amount at issuance date to $2,000,000 at maturity.
B) The carrying amount decreases from its amount at issuance date to $2,000,000 at maturity.
C) The amount of annual interest paid to bondholders increases over the 15-year life of the bonds.
D) The amount of annual interest expense decreases as the bonds approach maturity.
Q2) The market interest rate related to a bond is also called the
A) stated interest rate
B) effective interest rate
C) contract interest rate
D) straight-line rate
Q3) Bondholders claims on the assets of the corporation rank ahead of stockholders.
A)True
B)False
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Page 14
Chapter 13: Investments and Fair Value Accounting
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Sample Questions
Q1) Jacks Corporation purchases $200,000 bonds plus accrued interest for 2 months of $2,000 from Kennedy Company on March 1. The bonds have an annual interest rate of 6% payable on June 30 and December 31. The entry to record the purchase of the bonds would include:
A) Interest Receivable debit $2,000
B) Investment in Bonds debit $202,000.
C) Cash credit $200,000
D) Interest Revenue credit $2,000.
Q2) Temporary investments are
A) recorded at cost but reported at fair market value
B) recorded at cost and reported at cost
C) recorded at cost but reported at lower of cost or fair market value
D) recorded at fair market value and reported at fair market value
Q3) Newville Corporation reported net income of $50,000 in 2012. 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 $20,000 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?
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) On the statement of cash flows, the cash flows from investing activities section would include
A) receipts from the issuance of capital stock
B) payments for dividends
C) payments for retirement of bonds payable
D) receipts from the sale of investments
Q2) Cash paid to acquire treasury stock should be shown on the statement of cash flows from investing activities.
A)True
B)False
Q3) The order of presentation of activities on the statement of cash flows is
A) operating, investing, and financing.
B) operating, financing, and investing.
C) financing, operating, and investing.
D) financing, investing, and operating.
Q4) There is no difference in the Investing and Financing sections of the statement of cash flows using the indirect and direct method.
A)True
B)False
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) The percentage analysis of increases and decreases in individual items in comparative financial statements is called
A) vertical analysis
B) solvency analysis
C) profitability analysis
D) horizontal analysis
Q2) Assuming that the quantities of inventory on hand during the current year were sufficient to meet all demands for sales, a decrease in the inventory turnover for the current year when compared with the turnover for the preceding year indicates an improvement in inventory management.
A)True
B)False
Q3) A financial statement showing each item on the statement as a percentage of one key item on the statement is called common-sized financial statements.
A)True
B)False
Q4) What is a major advantage of using percentages rather than dollar changes in doing horizontal and vertical analysis?
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