Intermediate Financial Accounting
Pre-Test Questions
Course Introduction
Intermediate Financial Accounting builds upon foundational accounting principles to deepen students understanding of the preparation, analysis, and interpretation of financial statements in accordance with generally accepted accounting principles (GAAP). The course emphasizes topics such as revenue recognition, measurement of assets and liabilities, investments, income tax accounting, and shareholders equity. Students will engage with complex transactions, learn to apply accounting standards to real-world scenarios, and develop the analytical skills necessary for interpreting financial data. This course is essential for those pursuing advanced studies in accounting, finance, or related business fields.
Recommended Textbook Financial Accounting 3rd Edition by Robert Kemp
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12 Chapters
1837 Verified Questions
1837 Flashcards
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Page 2
Chapter 1: Business, Accounting, and You
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) One of the newer forms of business is a:
A)corporation.
B)sole proprietorship.
C)partnership.
D)limited liability company.
Answer: D
Q2) Which of the following has double taxation of earnings?
A)Limited liability company
B)Proprietorship
C)Corporation
D)Partnership
Answer: C
Q3) Society is considered to be a stakeholder in a business.
A)True
B)False
Answer: True
Q4) Cash accounting recognizes business transactions when cash is received or paid.
A)True
B)False
Answer: True
Page 3
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Chapter 2: Analyzing and Recording Business Transactions
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Sample Questions
Q1) Land,Cash,Office Equipment and Accounts Receivable belong to what category of accounts?
A)Liabilities
B)Revenues
C)Expenses
D)Assets
Answer: D
Q2) Accounts starting with the number 4 would represent: A)assets.
B)liabilities.
C)revenues.
D)expenses.
Answer: C
Q3) The account used to record payment of a telephone bill immediately after receiving it,would be a(n):
A)asset.
B)liability.
C)revenue.
D)expense. Answer: D
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Chapter 3: Adjusting and Closing Entries
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Sample Questions
Q1) The total dollars in an Accumulated Depreciation account are:
A)added to the corresponding asset account.
B)divided into the corresponding asset account.
C)subtracted from the corresponding asset account.
D)subtracted from the corresponding liability account.
Answer: C
Q2) The account balances on the post-closing trial balance should match the balances in the:
A)general journal.
B)Income Statement.
C)general ledger.
D)Statement of Retained Earnings.
Answer: C
Q3) The balance of Retained Earnings on the adjusted trial balance does not represent the final Retained Earnings balance on the Balance Sheet.
A)True
B)False
Answer: True
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Chapter 4: Accounting for a Merchandising Business
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Sample Questions
Q1) FOB destination means that title passes at the time of shipment of the product to the buyer from the seller.
A)True
B)False
Q2) An invoice of $237.50 is dated April 2,terms 2/10,n/30.If the invoice is paid on April 9,the amount to be paid is:
A)$4.75.
B)$23.75.
C)$232.75.
D)$237.50.
Q3) Both purchase returns and allowances decrease the merchandiser's inventory cost. A)True
B)False
Q4) Retailers may buy goods from the manufacturer and then sell the goods to consumers. A)True B)False
Q5) Debit card and credit card sales are counted as cash transactions. A)True
B)False
6
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Chapter 5: Inventory
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Sample Questions
Q1) Other than the cost of purchasing the inventory,another large cost of inventory would be storage of the inventory.
A)True
B)False
Q2) The first step in using the gross profit method to estimate ending inventory is to:
A)calculate the cost of goods available for sale.
B)estimate the ending inventory.
C)estimate the beginning inventory.
D)estimate the cost of goods sold.
Q3) If shrinkage is found for $500,an adjusting entry would be made as follows:
A)debit Inventory for $500;credit Cost of Goods Sold for $500.
B)debit Inventory for $500;credit Sales Returns and Allowances for $500.
C)debit Cost of Goods Sold for $500;credit Inventory for $500.
D)debit Sales Returns and Allowances for $500;credit Inventory for $500.
Q4) Which of the following would probably NOT need to be disclosed in a footnote?
A)Change of inventory methods
B)A material change in estimated shrinkage
C)A change in depreciation method
D)A 10% increase in sales
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Chapter 6: The Challenges of Accounting: Standards, internal Control, audits, fraud, and Ethics
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Sample Questions
Q1) Establishing a hierarchy to let all management and employees know what is going on in a company would be an example of what element of internal control?
A)Risk assessment
B)Monitoring
C)Information and communication
D)Control environment
Q2) Separation of duties is part of the control environment of an internal control system.
A)True
B)False
Q3) U.S.GAAP has been organized into what is called the Accounting Standards Codification.
A)True
B)False
Q4) One objective of an internal control system is to safeguard the assets of a company.
A)True
B)False
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Page 8
Chapter 7: Cash and Receivables
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Sample Questions
Q1) Accounts Receivable are classified as Current Assets.
A)True
B)False
Q2) The percent of sales method is the only method allowed by GAAP to estimate the amount of uncollectible accounts.
A)True
B)False
Q3) Charmed,Inc.had credit sales for the period of $142,000.The balance in Allowance for Doubtful Accounts is a debit of $643.If Charmed estimates that 2% of credit sales will be uncollectible,what is the required journal entry to record estimated uncollectible accounts?
A)Debit Bad Debt Expense,$2,840;credit Allowance for Uncollectible Accounts,$2,840.
B)No entry is required.
C)Debit Bad Debt Expense,$3,483;credit Allowance for Uncollectible Accounts,$3,483.
D)Debit Bad Debt Expense,$2,197;credit Allowance for Uncollectible Accounts,$2,197.
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9
Chapter 8: Long-Term and Other Assets
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Sample Questions
Q1) Interest and dividends earned during the period are reported on the Income Statement for which kind of marketable securities?
A)Trading securities
B)Available-for-sale securities
C)Held-to-maturity securities
D)All types of securities show interest and dividend income on the Income Statement.
Q2) Capitol Construction Company made a basket purchase of three items.Item X was appraised at $35,000;item Y was appraised at $55,000 and item Z was appraised at $60,000.The purchase price was $125,000.The amount at which item Z should be recorded (rounded to the nearest dollar)is:
A)$72,000.
B)$83,300.
C)$50,000.
D)$29,167.
Q3) Adding on 30 rooms to an existing hotel would be considered a betterment because the addition added to the hotel's capacity.
A)True
B)False
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Chapter 9: Current Liabilities and Long-Term Debt
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Sample Questions
Q1) TNT Construction had cash sales for the month of June totaling $43,700.TNT offers a 1-year warranty on its construction services.If TNT estimates warranty claims will equal 5% of sales,the journal entry to record the estimated warranty expense for the month is:
A)debit Warranty expense,$2,185;credit Cash,$2,185.
B)debit Estimated warranty payable,$2,185;credit Warranty expense,$2,185.
C)debit Warranty expense,$2,185;credit Estimated warranty payable,$2,185.
D)debit Warranty expense,$2,185;credit Sales revenue,$2,185.
Q2) Which of the following would be considered a contingent liability?
A)Sales tax obligation
B)Mortgage obligation
C)Accounts Payable obligation
D)Pending legal action
Q3) Contingent liabilities pose an ethical challenge because they're based on past events,they are easier to manipulate.
A)True
B)False
Q4) EBIT is also called operating profit.
A)True
B)False
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Chapter 10: Corporations: Paid-In Capital and Retained Earnings
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Sample Questions
Q1) Many companies raise capital by issuing stock directly to stockholders or by using an underwriter.
A)True
B)False
Q2) Dennis owns 2% of the total shares in a company;if the company issues a dividend he will receive 2% of the dividend.
A)True
B)False
Q3) If you own 800 shares (3% of a corporation's stock)and the corporation issues 10,000 new shares,how many of the new shares can your purchase under preemptive right?
A)0
B)300
C)800
D)1,100
Q4) The formula for return on equity is net income divided by average Stockholders' Equity.
A)True
B)False
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) Gains on the sale of long-term assets are:
A)added to investing activities.
B)added to financing activities.
C)added to operating activities.
D)subtracted from operating activities.
Q2) Investing Cash Flows affect:
A)current assets and current liabilities.
B)long-term asset accounts.
C)equity accounts.
D)long-term liability accounts.
Q3) Activities that increase and decrease as a result of selling a company's stock are:
A)marketing activities.
B)operating activities.
C)investing activities.
D)financing activities.
Q4) Cash received from issuing stock would be included in financing activities.
A)True
B)False
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13
Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) A business's competitive environment describes:
A)how a business competes for critical resources.
B)how a business is affected by the overall economy.
C)how a business uses its business model to create a competitive advantage.
D)how a business makes its product.
Q2) What is the return on equity if sales are $100,000,net income is $22,700,beginning Stockholders' Equity is $88,000,and ending common Stockholders' Equity is $84,000?
A)22.7%
B)25.8%
C)27.0%
D)26.4%
Q3) A useful tool to reduce the bias when comparing the performance of different sized companies is to do a horizontal analysis on each one.
A)True
B)False
Q4) The economic environment of a business describes how a business is affected by competitors.
A)True
B)False
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