Intermediate Accounting
Final Test Solutions
Course Introduction
Intermediate Accounting is a comprehensive course that delves into the theory and application of financial accounting principles beyond the introductory level. Students explore complex topics such as revenue recognition, inventory valuation, long-term assets, liabilities, shareholders' equity, and the preparation and analysis of financial statements in accordance with Generally Accepted Accounting Principles (GAAP). The course places a strong emphasis on understanding accounting standards, professional judgment, ethical considerations, and critical analysis of financial information, preparing students for advanced accounting coursework and professional exams.
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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194 Verified Questions
194 Flashcards
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Sample Questions
Q1) Managerial accounting information is used by external and internal users equally.
A)True
B)False
Answer: False
Q2) Bob Johnson is the sole stockholder of Johnson's Carpet Cleaning Service. Bob purchased a personal automobile for $10,000 cash plus he took out a loan for $20,000 in his name. Describe how this transaction is related to the business entity concept. Answer: Under the business entity concept, economic data is limited to the direct activities of the business. The business is viewed as separate from its stockholder. Therefore, when Bob buys a personal automobile, it is not listed on the books of Johnson's Carpet Cleaning Service. In this case, the loan is a personal debt and not a liability of the company and the cash is from Bob's personal account and not the company's account.
Q3) Proper ethical conduct implies that you only consider what's in your best interest.
A)True
B)False
Answer: False
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Chapter 2: Analyzing Transactions
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222 Flashcards
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Sample Questions
Q1) The chart of accounts should be the same for each business.
A)True
B)False
Answer: False
Q2) Prarie Clinic purchased X-ray equipment for $4,000, paid $1,275 down, with the remainder to be paid later. The correct entry would be
A) Equipment 1,275 Cash 1,275
B) Cash 1,275 Accounts Payable 2,725
Equipment 4,000
C) Equipment Expense 4,000 Accounts Payable 1,275
Cash 2,725
D) Equipment 4,000 Accounts Payable 2,725
Cash 1,275
Answer: D
Q3) Accounts in the ledger are usually maintained in alphabetical order.
A)True
B)False
Answer: False
Q4) Prepare a journal entry on March 27 for the payment of $8,000 in dividends.
Answer: 11ea9299_7dce_128e_85c7_01882ae826fa_TB6235_00
Page 4
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) On December 31, the balance in the Office Supplies account is $1,385. A count shows $435 worth of supplies on hand. Prepare the adjusting entry for supplies.
Answer: $1,385 - $435 = $950 11ea9299_7dc3_15be_85c7_9b3e2387d7a0_TB6235_00
Q2) The adjustment for accrued fees was debited to Accounts Payable instead of Accounts Receivable. This error will be detected when the Adjusted Trial Balance is prepared.
A)True
B)False
Answer: False
Q3) On January 1st, Great Designs Company had a debit balance of $1,450 in the Office Supplies account. During the month, Great Designs purchased $115 and $160 of office supplies and journalized them to the Office Supplies asset account upon purchasing. On January 31st, an inspection of the office supplies cabinet shows that only $350 of Office Supplies remains in the locker. Prepare the January 31st adjusting entry for Office Supplies.
Answer:
11ea9299_7dc4_002e_85c7_1b9486cd576e_TB6235_00 11ea9299_7dc4_002f_85c7_0dc0e04a3c31_TB6235_00
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Page 5
Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) The journal entry to close the Fees Earned, $275, and Rent Revenue, $200, accounts on December 31st during the closing process would be
A) Dec. 31 Fees Earned 275 Rent Revenue 200 Income Summary 475
B) Dec. 31 Income Summary 475 Fees Earned 275 Rent Revenue 200
C) Dec. 31 Revenues 475 Income Summary 475
D) Dec. 31 Income Summary 475 Revenues 475
Q2) Land is an example of a plant asset.
A)True
B)False
Q3) The Income Statement columns in the work sheet show that debits total $55,800 and credits total $62,705. What does this information mean to the accountant?
A) Net income is equal to $6,905.
B) Net loss is equal to $6,905.
C) The accounts are out of balance, indicating an error has been made.
D) The accounts have not been updated.
Q4) If working papers are not considered part of the formal accounting records, then why are they used?
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Chapter 5: Accounting for Merchandising Businesses
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221 Verified Questions
221 Flashcards
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Sample Questions
Q1) If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are
A) n/30
B) FOB shipping point
C) FOB destination
D) consigned
Q2) When comparing a retail business to a service business, the financial statement that changes the most is the
A) balance sheet
B) income statement
C) retained earnings statement
D) statement of cash flows
Q3) What type of company would normally offer trade discounts to its customers?
A) Service companies
B) Retailers
C) Wholesalers
D) On-line retailers
Q4) Sellers and buyers are required to record trade discounts.
A)True
B)False
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Chapter 6: Inventories
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Sample Questions
Q1) During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method.
A)True
B)False
Q2) A business using the retail method of inventory costing determines that merchandise inventory at retail is $1,700,000. If the ratio of cost to retail price is 55%, what is the amount of inventory to be reported on the financial statements?
Q3) Under the periodic inventory system, the merchandise inventory account continuously discloses the amount of inventory on hand.
A)True
B)False
Q4) Which of the following is used to analyze the efficiency and effectiveness of inventory management?
A) inventory turnover only
B) number of days' sales in inventory only
C) both inventory turnover and number of days' sales in inventory
D) neither inventory turnover or number of days' sales in inventory
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8
Chapter 7: Sarbanes-Oxley, Internal Control, and Cash
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) Sarbanes-Oxley's purpose is to improve financial reporting.
A)True
B)False
Q2) Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the company. This item is a(n)
A) deduction from the balance per company's records
B) addition to the balance per bank statement
C) deduction from the balance per bank statement
D) addition to the balance per company's records
Q3) The main reason that the bank statement cash balance and the company's cash balance do initially balance is due to timing differences.
A)True
B)False
Q4) A voucher is a form on which is recorded pertinent data about a liability and the particulars of its payment.
A)True
B)False
Q5) Distinguish preventive controls from detective controls and give examples of each as they relate to cash.
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Chapter 8: Receivables
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Sample Questions
Q1) To record estimated uncollectible receivables using the allowance method, the adjusting entry would be a
A) debit to Bad Debs Expense and a credit to Allowance for Doubtful Accounts.
B) debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.
C) debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
D) debit to Loss on Credit Sales and a credit to Accounts Receivable.
Q2) One of the weaknesses of the direct write-off method is that it
A) understates accounts receivable on the balance sheet
B) violates the matching principle
C) is too difficult to use for many companies
D) is based on estimates
Q3) Receivables that are expected to be collected in cash in eighteen months or less are reported in the Current Asset section of the balance sheet.
A)True
B)False
Q4) In computing the maturity date of a note, the date the note is issued is included but the due date is omitted.
A)True
B)False
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Chapter 9: Fixed Assets and Intangible Assets
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Sample Questions
Q1) Regardless of the depreciation method, the amount that will be depreciated during the life of the asset will be the same.
A)True
B)False
Q2) Fill in the missing numbers using the formula for Fixed Asset Turnover: \(\begin{array}{|c|c|c|c|c|}
\hline \text { Compary D } & \text { Company C } & \text { Company B } & \text { Company A } & \\
\hline & \$ 9000,000 & \$ 720,000 & \$ 5,000,000 & \text { Net Sales } \\
\hline \$ 380,000 & 10 & \$ 275,000 & \$ 450,000 & \text { Beginning Fixed Assets } \\ \hline \$ 420,000 & \$ 310,000 & ? & \$ 800,000 & \text { Ending Fixed Assets } \\ \hline 2.6 \text { times } & 3 \text { times } & 2.4 \text { times } & \text { ? } & \text { Fixed Asset Tunnover } \\ \hline \end{array}\)
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Chapter 10: Current Liabilities and Payroll
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Sample Questions
Q1) The proceeds from discounting a $20,000, 60-day, note payable at 6% is $20,200.
A)True
B)False
Q2) The journal entry a company uses to record the issuance of a note for the purpose of converting an existing account payable would be
A) debit Cash; credit Accounts Payable
B) debit Accounts, Payable; credit Cash
C) debit Cash; credit Notes Payable
D) debit Accounts Payable; credit Notes Payable
Q3) During its first year of operations, a company granted employees vacation privileges and pension rights estimated at a cost of $21,500 and $15,000. The vacations are expected to be taken in the next year and the pension rights are expected to be paid in the future 5-30 years. What is the total cost of vacation pay and pension rights to be recognized in the first year?
A) $15,000
B) $36,500
C) $6,500
D) $21,500
Q4) List five internal controls that relate directly to payroll.
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Chapter 11: Corporations: Organization, Stock Transactions, and Dividends
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Sample Questions
Q1) The primary purpose of a stock split is to
A) increase paid-in capital
B) reduce the market price of the stock per share
C) increase the market price of the stock per share
D) increase retained earnings
Q2) A corporation issues 1,500 shares of common stock for $ 32,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for
A) $15,000
B) $32,000
C) $17,000
D) $2,000
Q3) The amount of a corporation's retained earnings that has been restricted/appropriated should be reported in the notes to the financial statements.
A)True
B)False
Q4) Paid-in capital may originate from real estate donated to the corporation.
A)True
B)False
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Chapter 12: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) If $1,000,000 of 8% bonds are issued at 103 1/2, the amount of cash received from the sale is
A) $1,080,000
B) $965,000
C) $1,000,000
D) $1,035,000
Q2) If bonds payable are not callable, the issuing corporation
A) cannot repurchase them before maturity
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
Q3) When callable bonds are redeemed below carrying value
A) Gain on Redemption of Bonds is credited
B) Loss on Redemption of Bonds is debited
C) Retained Earnings is credited
D) Retained Earnings is debited
Q4) Both callable and non-callable bonds can be purchased by the issuing corporation in the open market.
A)True
B)False
Page 14
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Chapter 13: Investments and Fair Value Accounting
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Sample Questions
Q1) Available-for-sale securities are securities that management expects to sell in the future, but are actively traded for profit.
A)True
B)False
Q2) (1) Discuss factors contributing to the trend to fair value accounting. (2) What are some of the disadvantages associated with using fair value?
Q3) An investor purchased 500 shares of common stock, $25 par, for $21,750. Subsequently, 100 shares were sold for $49.50 per share. What is the amount of gain or loss on the sale?
A) $12,750 gain
B) $600 gain
C) $600 loss
D) $9,250 loss
Q4) Temporary investments are recorded at their cost which would include broker's commissions.
A)True
B)False
Q5) Define (1) debt securities and (2) equity securities. Include their similarities and differences in your discussion.
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Chapter 14: Statement of Cash Flows
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162 Flashcards
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Sample Questions
Q1) Which of the following is not one of the four basic financial statements?
A) balance sheet
B) statement of cash flows
C) statement of changes in financial position
D) income statement
Q2) Net income for the year was $29,500. Accounts receivable increased $2,500, and accounts payable increased $5,400. Under the indirect method, the cash flow from operations is $32,400.
A)True
B)False
Q3) When using the work sheet method to analyzing noncash accounts , no order of analysis is required, but it is more efficient to start with Retained Earnings and proceed upward in the account listing.
A)True
B)False
Q4) 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
Page 16
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) All of the following are typically included in the Management's Discussion and Analysis in annual reports except:
A) explanations of any significant changes between the current and prior years' financial statements.
B) management's assessment of liquidity.
C) journal entries.
D) off-balance-sheet arrangements
Q2) Why would you compare or not compare Coca-Cola and Pepsi-Cola (PepsiCo) as companies to each other?
Q3) The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis.
A)True
B)False
Q4) Current position analysis indicates a company's ability to liquidate current liabilities.
A)True
B)False
Q5) Define solvency and profitability. How are they alike?
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Page 17