Intermediate Accounting
Chapter Exam Questions
Course Introduction
Intermediate Accounting builds upon foundational accounting principles to provide a comprehensive understanding of complex financial reporting standards and practices. This course delves into the preparation, analysis, and interpretation of financial statements, covering topics such as revenue recognition, inventory valuation, long-term assets, liabilities, equity, and investments. Students will engage with real-world case studies and contemporary issues in accounting, gaining the technical skills and conceptual knowledge required for professional advancement or further study in accounting and finance.
Recommended Textbook
Financial and Managerial Accounting 9th Edition by Belverd E. Needles
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Page 2
Chapter 1: Uses of Accounting Information and the Financial Statements
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Sample Questions
Q1) Financial position may be assessed by referring to a balance sheet.
A)True
B)False Answer: True
Q2) Knowledge of the exchange rate is necessary to apply the money measure concept in case of international transactions.
A)True
B)False Answer: True
Q3) Which of the following financial statements is concerned with the enterprise at a point in time?
A) Statement of retained earnings
B) Income statement
C) Statement of cash flows
D) Balance sheet
Answer: D
Q4) Par value is the minimum amount that can be reported as retained earnings.
A)True
B)False Answer: False
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Chapter 2: Analyzing Business Transactions
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Sample Questions
Q1) A credit to an asset account means that asset account has been increased.
A)True
B)False
Answer: False
Q2) Generally,before Accounts Payable is debited,it is credited.
A)True
B)False
Answer: True
Q3) Which of the following statements is true about a journal entry?
A) The Post. Ref. column is filled in prior to posting.
B) All debits are listed before any credits.
C) The name of the month should be repeated for each entry.
D) An explanation must follow each debit and each credit.
Answer: B
Q4) All of the following actions can help a business manage its cash flows except
A) convince its creditors to allow payment over a period of time.
B) pay for all expenditures immediately.
C) be efficient in making collections from its customers.
D) arrange for a line of credit at the bank, should the funds be needed.
Answer: B
Page 4
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Chapter 3: Measuring Business Income
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Sample Questions
Q1) Distinguish between a deferral and an accrual.
Answer: A deferral is the postponement of the recognition of an expense already paid or of a revenue already received.An accrual is the recognition of an expense or revenue that has arisen but that has not yet been recorded.
Q2) Accumulated depreciation is classified as a(n)
A) contra-expense account.
B) expense account.
C) contra-asset account.
D) liability account.
Answer: C
Q3) Retailers often end their fiscal year that ends
A) during a slack season.
B) during the peak of the busy season.
C) at different times each year, depending on the tax consequences.
D) on September 30.
Answer: A
Q4) Depreciation Expense-Equipment is an example of a contra account.
A)True
B)False
Answer: False
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Chapter 3: Supplement - Closing Entries and the Work Sheet
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Sample Questions
Q1) Which of the following accounts will have an amount in the Adjustments columns of the work sheet but probably not in the Trial Balance columns?
A) Common Stock
B) Utilities Expense
C) Depreciation Expense-Machinery
D) Revenue from Services
Q2) Monty Milko is the only accountant employed at Gamma Enterprises,Inc.When asked by the company president if the financial statements had been prepared yet,Milko answered that he had completed all of his work except the preparation of the statements.He added that the net income that would appear on the current income statement would be $369,075.Identify the two instances where Milko would have learned the net income before he actually prepared the income statement.
Q3) The amount for Dividends will appear in the Income Statement columns of a work sheet.
A)True
B)False
Q4) Why would a large company probably benefit more from a work sheet than would a very small company?
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Chapter 4: Financial Reporting and Analysis
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Sample Questions
Q1) Which of the following should be classified as an intangible asset?
A) Land held for future use
B) Accounts receivable
C) Building
D) Franchises
Q2) Patents would appear in which section of the balance sheet?
A) Investments
B) Property, plant, and equipment
C) Current assets
D) Intangible assets
Q3) Which of the following is a measure of liquidity?
A) Return on equity
B) Return on assets
C) Working capital
D) Profit margin
Q4) The main difference between intangible assets and property,plant,and equipment is the length of the asset's life.
A)True
B)False
Q5) State the definition of a current asset.
Page 7
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Chapter 5: The Operating Cycle and Merchandising Operations
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Sample Questions
Q1) Which of the following documents is sent to the vendor (seller)of goods?
A) Purchase requisition
B) Purchase order
C) Receiving report
D) Invoice
Q2) The terms "2/10,n/30" mean that a 2 percent discount is allowed on payments made over 10 but before 30 days after the invoice date.
A)True
B)False
Q3) Management's authorization of transactions relates to a control activity in the accounting system.
A)True
B)False
Q4) All of the following are examples of internal control activities except
A) rotation of key personnel.
B) company picnics for all employees.
C) bank reconciliations.
D) insistence that employees take earned vacations.
Page 8
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Chapter 6: Inventories
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Sample Questions
Q1) The FIFO inventory method produces the most up-to-date figure for ending inventory.
A)True
B)False
Q2) The average-cost method produces an ending inventory figure that is somewhere between the figures produced by FIFO and LIFO.
A)True
B)False
Q3) A major criticism of the FIFO method is that it magnifies the effects of the business cycle on business income.
A)True
B)False
Q4) Goods held on consignment are
A) kept for sale on the premises of the consignor.
B) included as part of no one's ending inventory.
C) never owned by the consignee.
D) included in the consignee's ending inventory.
Q5) Inventory turnover is a measure expressed in terms of a percentage.
A)True
B)False
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Chapter 7: Cash and Receivables
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Sample Questions
Q1) Which of the following bank reconciliation items would result in a journal entry on the company's books?
A) Bank error
B) Interest income
C) Deposit in transit
D) Outstanding checks
Q2) The fee for factoring without recourse is normally higher than it would be with recourse.
A)True
B)False
Q3) Which of the following methods of recording uncollectible accounts expense would be described best as an income statement method?
A) Both direct charge-off method and accounts receivable aging method
B) Direct charge-off method
C) Percentage of net sales method
D) Accounts receivable aging method
Q4) On a bank reconciliation,interest income would be added to the balance per bank.
A)True
B)False
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Chapter 8: Current Liabilities and Fair Value Accounting
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Sample Questions
Q1) A customer is injured using a company's product.The potential liability that may result is called a(n)
A) contingent liability.
B) estimated liability.
C) definitely determinable liability.
D) estimated warranty liability.
Q2) Heidi wishes to deposit an amount into her savings account that will enable her to withdraw $800 per year for the next four years.She should deposit $800,multiplied by the A) present value of a single sum factor.
B) present value of an ordinary annuity factor.
C) future value of a single sum factor.
D) future value of an ordinary annuity factor.
Q3) A commitment is a legal obligation that does not meet the technical requirements for recognition as a liability.
A)True
B)False
Q4) There is no limit to the amount of income subject to the Medicare tax.
A)True
B)False
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Chapter 9: Long Term Assets
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Sample Questions
Q1) Which of the following is not considered an intangible asset?
A) A leasehold
B) An oil well
C) A franchise
D) Goodwill
Q2) Leasehold improvements become the property of the lessor at the end of the lease.
A)True
B)False
Q3) A symbol or name used to identify a product or service is called a
A) copyright.
B) patent.
C) trademark.
D) license.
Q4) The unexpired cost of a plant asset is referred to as its
A) depreciable cost.
B) carrying value.
C) accumulated depreciation.
D) original cost.
Q5) Present two arguments in favor of the use of accelerated depreciation.
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Chapter 10: Long-Term Liabilities
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Sample
Questions
Q1) Knollwood Corporation issued $300,000 of 30-year,8 percent bonds at 106 on one of its semi-annual interest dates.The straight-line method of amortization is to be used.What is the total interest cost of the bonds?
A) $719,500
B) $702,000
C) $720,000
D) $738,000
Q2) The debt to equity ratio is a measure of financial leverage.
A)True
B)False
Q3) When bonds are converted to common stock,which of the following could be part of the entry?
A) Credit to Gain on Conversion of Bonds
B) Credit to Unamortized Bond Premium
C) Credit to Unamortized Bond Discount
D) Debit to Common Stock
Q4) The call price of bonds is usually below face value.
A)True
B)False
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Chapter 11: Contributed Capital
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Sample Questions
Q1) One disadvantage of a corporation is the lack of mutual agency.
A)True B)False
Q2) The Additional Paid-in Capital account normally arises in the accounting records when
A) the number of shares issued exceeds par value.
B) the stated value of capital stock is greater than the par value.
C) the market value of the stock rises above par value.
D) capital stock is issued at an amount greater than par value.
Q3) If there is no change in the number of shares authorized and issued from one year to the next,but there is a change in the number of shares outstanding on those same dates,how would you explain that change?
Q4) The cost of treasury stock is deducted from total Contributed Capital and Retained Earnings in determining total stockholders' equity.
A)True B)False
Q5) Preferred stock is considered the residual equity of a corporation. A)True B)False
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Chapter 12: Investments
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Sample Questions
Q1) Which is the only type of investment that is always classified as short-term?
A) Trading securities
B) Held-to-maturity securities
C) Available-for-sale securities
D) Equity securities
Q2) In preparing consolidated financial statements,all of the following commonly require elimination entries except a(n)
A) intercompany loan.
B) purchase from a nonaffiliated.
C) intercompany sale.
D) intercompany investment.
Q3) All of the following are indications of significant influence over another company except
A) participation in policymaking.
B) representation on the board of directors.
C) technological dependency between the two companies.
D) ownership of all of the other company's debt securities.
Q4) Most long-term bond investments are classified as held-to-maturity securities.
A)True
B)False
Page 15
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Chapter 13: The Corporate Income Statement and the Statement of Stockholders Equity
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Sample Questions
Q1) The results of discontinued operations are excluded from operating income on the income statement.
A)True
B)False
Q2) What issues must be considered when determining whether or not an uninsured loss from tornado destruction should be treated as an extraordinary item?
Q3) The write-off of goodwill that has been impaired is a component of income from operations.
A)True
B)False
Q4) Write-downs and restructurings are often an indication of bad management decisions in the past.
A)True
B)False
Q5) A stock dividend is a pro rata distribution of cash to a corporation's stockholders.
A)True
B)False
Q6) Why must certain income statement items be presented "net of taxes"?
Page 16
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Chapter 14: The Statement of Cash Flows
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Sample Questions
Q1) Elkwood Corporation acquired a land site with a building by issuing a 30-year mortgage payable.In Elkwood's statement of cash flows,this transaction should be shown
A) only as a cash flow from investing activity for the purchase of the land and building.
B) only as a cash flow from financing activity for the issuance of the mortgage payable.
C) in the schedule of noncash investing and financing transactions.
D) as both a cash flow from investing activity and a cash flow from financing activity.
Q2) Under the indirect method,gains or losses from the sale of equipment used in operations would appear as adjustments in the cash flows from operating activities section of the statement of cash flows.
A)True
B)False
Q3) A negative free cash flow indicates that the company has met all its planned cash commitments and has cash available to reduce debt or to expand.
A)True
B)False
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Chapter 15: The Changing Business Environment - a Managers Perspective
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Sample Questions
Q1) Management accounting activities
A) are synonymous with financial accounting activities.
B) substitute for the management cycle.
C) complement the management cycle.
D) have nothing to do with the management cycle.
Q2) Although some management accountants strive to update their knowledge and skills,such updating is not within the realm of management accountants' ethical standards.
A)True
B)False
Q3) The Chief Financial Officer (CFO)of your company has asked you to help her develop a cost control report to be distributed within the company.She wants your input concerning what she should think about before developing such a report.Discuss the significant points,in detail,the CFO should consider before the cost control report is prepared.
Q4) Financial accounting usually involves analyses of various segments of a business,such as cost centers,profit centers,or departments,or of some specific aspect of its operations.
A)True B)False
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Chapter 16: Cost Concepts and Cost Allocation
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Sample Questions
Q1) Both product costs and period costs could appear on the income statement.
A)True
B)False
Q2) Property taxes and equipment depreciation are examples of indirect manufacturing costs.
A)True
B)False
Q3) Nonvalue-adding costs increase the cost of a product.
A)True
B)False
Q4) Total manufacturing costs increase the balance of the Work in Process Inventory account.
A)True
B)False
Q5) Manufacturing costs behave as variable or fixed costs.
A)True
B)False
Q6) Overhead costs generally are estimated as part of the normal budgeting function.
A)True
B)False
Page 19
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Chapter 17: Costing Systems- Job Order Costing
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Sample Questions
Q1) Few actual production processes fit the definitions of job order costing or process costing exactly.
A)True
B)False
Q2) In cost-plus contracts,the "plus" is the sales price.
A)True
B)False
Q3) In a job order costing system,indirect labor costs are transferred to the Overhead account by increasing the Factory Payroll account and decreasing the Overhead account.
A)True
B)False
Q4) When a job has been completed,all of the costs assigned to that job order are moved to the Finished Goods Inventory account.
A)True
B)False
Q5) In a job order costing system,the Factory Payroll account is a clearing account. A)True
B)False
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Chapter 18: Costing Systems- Process Costing
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Sample Questions
Q1) The FIFO process costing method assumes that the items in ending work in process inventory were started and completed during the current period.
A)True
B)False
Q2) In process costing,all costs incurred by a department or production process are divided by the equivalent units produced during the period to determine the average cost per unit produced.
A)True
B)False
Q3) Measures of equivalent production are necessary in process costing because
A) job order costing procedures cannot be applied.
B) unit costs are computed by departments or processes at fixed time intervals.
C) perpetual inventories are not employed in process plants.
D) production methods are more complex than in job order costing systems.
Q4) The most commonly used method to assign costs to products in process costing is the FIFO costing method.
A)True
B)False
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21
Chapter 19: Value-Based Systems- Abm and Lean
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Sample Questions
Q1) A goal of process value analysis (PVA)is to reduce nonvalue-adding activities.Outline a procedure a company could use to accomplish this goal.
Q2) In activity-based costing,the first step in assigning costs is to
A) analyze all nonvalue-adding activities to determine if they are necessary support areas.
B) accumulate costs for each activity.
C) identify and classify each activity.
D) separate nonvalue-adding activities from value-adding activities.
Q3) The initial step in achieving the efficiency of a just-in-time system is to
A) redesign the plant layout.
B) replace laborers with machines.
C) stop ordering materials for inventory.
D) identify products that are not profitable.
Q4) Just-in-time operations attempt to significantly reduce
A) inspection time and moving time.
B) only storage time.
C) moving time and processing time.
D) inspection time and processing time.
Q5) How do managers measure an activity's performance?
Q6) Why is process value analysis not part of the general ledger accounting system?
Page 22
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Chapter 20: Cost Behavior Analysis
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Sample Questions
Q1) Is breakeven analysis a tool that can be used for a service-oriented business? Explain your answer.
Q2) Listed below are selected costs of sports car manufacturer at a production level of 4,000 cars.(a)Identify three fixed costs.(b)Support your answer by illustrating the cost behavior pattern per unit and in total as the annual volume of motorcycles produced increases from 4,000 cars to 8,000 cars for one fixed cost.(Note: The production increase is within the relevant range.)
\(\begin{array}{lr}
\text { Monthly machine rental charge } & \$ 8,000 \\
\text { Monthly insurance premiums on the plant } & 800 \\
\text { Sports car tire cost (per tire) } & 100\\
\text { Salaried employees' weekly payroll cost }&51,000\\
\text { Manufacturing hourly employees' weekly payroll}&88,000\\
\text { Depreciation on the equipment for the month}&6,000\\
\text { Car battery (one battery)}&70 \end{array}\)
Q3) The breakeven point is the level of activity at which fixed costs are recovered. A)True B)False
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Page 23
Chapter 21: The Budgeting Process
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Sample Questions
Q1) Which of the following is not a guideline for budget preparation?
A) Include financial data only.
B) Know the sources of budget information.
C) Know the purpose of the budget.
D) Identify the format of the budget.
Q2) Static budgets are prepared on quarterly basis and require frequent change during the annual budget period.
A)True
B)False
Q3) Managers do not need to know why a budget is being prepared.
A)True
B)False
Q4) Preparation of a production budget requires knowledge of the sales target in sales dollars.
A)True
B)False
Q5) Budgets assign resources and the responsibility to use them wisely to managers who are held accountable for their results.
A)True
B)False
24
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Chapter 22: Performance Management and Evaluation
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Sample Questions
Q1) The economic value added performance measure focuses on long-term financial performance.
A)True
B)False
Q2) How is the contribution margin calculated when utilizing variable costing?
A) Sales less variable cost of goods sold
B) Sales less variable cost of goods sold, less variable selling and administrative expenses
C) Sales less cost of goods sold
D) Sales less variable cost of goods sold, less variable selling and administrative expenses, less fixed cost of goods sold, less fixed selling and administrative expenses
Q3) A manager can improve EVA by
A) increasing assets and decreasing costs.
B) increasing sales and assets.
C) increasing cost of capital and assets.
D) decreasing assets and lowering cost of capital.
Q4) Why are managers more likely to achieve their objectives in both the short term and the long term when they utilize a tool such as the balanced scorecard?
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25
Chapter 23: Standard Costing and Variance Analysis
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Q1) Variance analysis involves computing the difference between standard and actual costs.
A)True
B)False
Q2) Using the standard costs of $5 per pound for a 10 pound bag of chocolate and the following actual cost and usage data,compute the direct materials price variance. \[\begin{array} { l l }
\text { Direct materials purchased and used } & 99,000 \text { pounds } \\ \text { Price paid far direct materials } & \$ 4.00 \text { per pound } \\
\text { Number of good urits produced } & 9,000 \text { urits } \end{array}\]
A) $45,000 (F)
B) $45,000 (U)
C) $54,000 (F)
D) $99,000 (F)
Q3) Discuss the keys to preparing a performance report based on standard costs and related variances.
Q4) Standard costs are based solely on expected future costs and conditions.
A)True B)False
Page 26
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Chapter 24: Short Run Decision Analysis
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Q1) Many of the decisions that managers make do not affect their organization's activities in the short run.
A)True B)False
Q2) If the incremental costs are greater than the incremental revenue,the product should not be processed further and should be sold at the split-off point.
A)True B)False
Q3) An old machine that originally cost $9,500 thus far has accumulated depreciation of $1,900.The remaining useful life is four years,with no salvage value at the end of its useful life.A new machine is now available that costs $8,500,with a useful life of five years and no residual value.The old machine could be sold now for $5,900.The annual cash operating costs for the old machine are $5,000,but for the new machine they would be only $2,500.Gross revenue from the products would be $12,000 annually for either machine.The company should
A) keep the old machine to avoid a $5,900 loss on its disposal.
B) keep the old machine to avoid a $1,700 loss on its disposal.
C) replace the old machine.
D) keep the old machine to avoid an $8,500 decrease in cash.
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Page 27
Chapter 25: Capital Investment Analysis
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Q1) Qualitative factors will not be considered in the evaluation of capital investment proposals.
A)True
B)False
Q2) A project is accepted under the net present value method when
A) the percentage return is greater than a predetermined minimum percentage.
B) total net cash inflows exceed the purchase price of the asset.
C) the purchase price of the asset is less than the present value of net cash inflows.
D) the present value of net cash inflows exceeds a predetermined minimum amount.
Q3) The most commonly used methods in the evaluation of capital investment proposals are net present value method,payback period method and the accounting rate-of-return method.
A)True
B)False
Q4) With regard to the time value of money,
A) amounts are adjusted for inflation over the period of the investment.
B) the amount of the present value is always higher than the future value.
C) the future value amount is always higher than the present value amount.
D) the present value and the future value have to be equal.
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Chapter 26: Pricing Decisions,incltarget Costing and Transfer Pricing
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Q1) A target cost is an anticipated cost that should be achieved at a midpoint in the product's life cycle.
A)True
B)False
Q2) Maximizing profits has been and continues to be a dominant factor in price setting.
A)True
B)False
Q3) An example of a pricing objective is to
A) ignore long-term pricing strategies in favor of short-term profits.
B) increase market share irrespective of the cost of a product.
C) maintain a price that is always under that of the competition.
D) maintain a minimum rate of return.
Q4) A selling division with adequate capacity to fulfill the demand of the buying division should sell to the buying division at any price that recovers incremental costs.
A)True
B)False
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Chapter 27: Quality Management and Measurement
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Q1) Which of the following specific measures of vendor quality would be used when evaluating vendors that supply a company with direct materials?
A) Defect-free material as a percentage of total materials received
B) Number of customer complaints
C) Time it takes to make a product
D) All would be considered to assess vendor quality of direct materials.
Q2) Measures of customer complaints and warranty claims are used in tracking
A) materials/scrap control performance.
B) inventory performance.
C) quality performance.
D) delivery performance.
Q3) The Deming Application Prize for quality originated in Japan.
A)True B)False
Q4) As a consequence of many manufacturing firms attempting to reduce the number of suppliers with which they deal,vendors that do not supply products with high quality and reliable delivery schedules may expect to be forced out of business.
A)True B)False
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Chapter 28: Financial Analysis of Performance
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) Days' inventory on hand is used to analyze
A) cash flow adequacy.
B) liquidity.
C) profitability.
D) long-term solvency.
Q2) Vertical analysis will result in common-size statements.
A)True
B)False
Q3) Holiday Corporation provided these figures for the year ended December 31,20xx: Cost of goods sold,$516,117; change in inventory,$67,483 decrease; average accounts payable,$52,529.
What is the company's payables turnover? Round your answer to one decimal place.
A) 9.1 times
B) 8.5 times
C) 10.9 times
D) 8.0 times
Q4) A limitation of using industry norms in financial performance evaluation is that some companies in the same industry may not be comparable.
A)True
B)False
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