(JHU) BU.210.620 Accounting & Financial Reporting Comprehensive Final Exam Assessment Q &, Exams of Accounting

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BU.210.

Accounting & Financial

Reporting

Comprehensive Final Exam

Assessment

Q & A

1. Multiple Choice: Which financial statement reports a company's financial performance over a specific accounting period? A) Balance Sheet B) Statement of Income C) Statement of Cash Flows D) Statement of Retained Earnings Answer : B) Statement of Income Rationale: The Statement of Income, also known as the Income Statement, reflects the company's financial performance, showing revenues, expenses, and profits over a specific period.
2. True/False: The accounting cycle begins with the preparation of financial statements. Answer : False Rationale: The accounting cycle starts with the identification and recording of transactions and ends with the preparation of financial statements.
3. Fill-in-the-Blank: The ________ is a financial statement that shows the financial position of a company at a specific point in time. Answer : Balance Sheet Rationale: The Balance Sheet provides a snapshot of a company's assets, liabilities, and equity at a particular date.

7. Multiple Choice: An increase in an asset account is recorded as a: A) Debit B) Credit Answer : A) Debit Rationale: In double-entry accounting, increases in asset accounts are recorded as debits.
8. True/False: The accrual basis of accounting records revenue when it is earned and expenses when they are incurred, regardless of when cash is exchanged. Answer : True Rationale: The accrual basis of accounting matches revenues to the time period in which they are earned and matches expenses to the time period in which they are incurred.
9. Fill-in-the-Blank: The process of allocating the cost of a tangible asset over its useful life is called ________. Answer : Depreciation Rationale: Depreciation systematically allocates the cost of a tangible asset over the periods benefiting from its use.
10. Multiple Choice: Which of the following transactions would increase both assets and equity? A) Issuing common stock

B) Taking out a loan C) Purchasing inventory on credit D) Paying dividends Answer : A) Issuing common stock Rationale: Issuing common stock increases assets (cash) and equity (common stock and additional paid-in capital).

11. True/False: The matching principle requires that expenses be matched with revenues in the period in which efforts are expended to generate those revenues. Answer : True Rationale: The matching principle is a cornerstone of accrual accounting, ensuring that expenses are recorded in the same period as the revenues they help to generate.
12. Fill-in-the-Blank: An obligation of the company that represents money owed to creditors is called a(n) ________. Answer : Liability Rationale: Liabilities represent debts and other obligations of the company to outside parties.
13. Multiple Choice: Which of the following is considered an intangible asset? A) Buildings

A) Prepaid expenses B) Accounts receivable C) Common stock D) Retained earnings Correct Answer : C) Common stock Rationale: Common stock represents the equity capital contributed by shareholders and is classified as a liability on the balance sheet. Fill-in-the-Blank Question: The accounting equation is expressed as Assets = Liabilities + Equity. Correct Answer : Liabilities Rationale: The accounting equation must always balance, with assets equaling the sum of liabilities and equity. True/False Question: True or False: Revenue recognition occurs when cash is received from a customer. Correct Answer : False Rationale: Revenue recognition is based on when goods or services are delivered, not necessarily when cash is received. Multiple Choice Question:

Which financial statement reports a company's financial position at a specific point in time? A) Income statement B) Statement of cash flows C) Balance sheet D) Statement of retained earnings Correct Answer : C) Balance sheet Rationale: The balance sheet provides a snapshot of a company's assets, liabilities, and equity at a particular date. Fill-in-the-Blank Question: The formula for calculating net income is Revenues - Expenses. Correct Answer : Revenues Rationale: Net income is the difference between total revenues and total expenses incurred by a company. True/False Question: True or False: Depreciation is recorded as an expense on the income statement. Correct Answer : True Rationale: Depreciation represents the allocation of an asset's cost over its useful life and is recognized as an expense on the income statement.

Multiple Choice Question: What is the purpose of the statement of income? A) To show a company's financial position at a specific point in time B) To report the company's cash inflows and outflows C) To present the results of operations over a period D) To summarize the changes in equity during a period Correct Answer : C) To present the results of operations over a period Rationale: The income statement shows a company's revenues, expenses, and net income or loss for a specific period. Fill-in-the-Blank Question: The formula for calculating the debt to equity ratio is Total Liabilities / Total Equity. Correct Answer : Total Equity Rationale: The debt to equity ratio measures the proportion of a company's financing that comes from debt compared to equity. True/False Question: True or False: Retained earnings represent the cumulative net income of a company that has been distributed to shareholders. Correct Answer : False

Rationale: Retained earnings reflect the accumulated profits that have not been distributed to shareholders as dividends. Multiple Choice Question: Which of the following is an example of an operating activity in the statement of cash flows? A) Purchase of land B) Issuance of common stock C) Payment of salaries to employees D) Repayment of a long-term loan Correct Answer : C) Payment of salaries to employees Rationale: Operating activities involve cash flows related to the core business operations of a company. Fill-in-the-Blank Question: The income statement is also known as the Statement of Profit and Loss. Correct Answer : Statement of Profit and Loss Rationale: The income statement summarizes a company's revenues, expenses, and profits or losses over a period. True/False Question:

Question: Which of the following is an example of a contra account? a) Accounts Receivable b) Accumulated Depreciation c) Inventory d) Prepaid Expenses Correct Answer : b) Accumulated Depreciation Rationale: Accumulated Depreciation is a contra account that is used to reduce the carrying amount of a long-lived asset on the balance sheet.

3. Fill-in-the-Blank: Question: A company records a $10,000 payment of cash for rent expense. The journal entry to record this transaction is: _______ Account _______ Debit _______ Credit Correct Answer : Rent Expense Debit Cash Credit Rationale: Rent expense is debited to increase the expense account, while cash is credited to decrease the asset account.
4. True/False:

Question: The matching principle requires that expenses be matched with the revenues they help generate. a) True b) False Correct Answer : a) True Rationale: The matching principle states that expenses should be recognized in the same period as the revenues they help to generate, in order to accurately reflect the financial performance of a business.

5. Multiple Choice: Question: Which financial statement provides a snapshot of a company's financial position at a specific point in time? a) Statement of Cash Flows b) Income Statement c) Balance Sheet d) Statement of Retained Earnings Correct Answer : c) Balance Sheet Rationale: The balance sheet provides a snapshot of a company's assets, liabilities, and equity at a specific point in time.

a) Prepaid Rent b) Accounts Payable c) Salary Payable d) Unearned Revenue Correct Answer : c) Salary Payable Rationale: Accrued expenses are expenses that have been incurred but not yet paid, such as salaries owed to employees.

9. Fill-in-the-Blank: Question: The revenue recognition principle dictates that revenue should be recognized when it is _______ and _______. Correct Answer : Earned Realizable Rationale: Revenue should be recognized when it is earned, meaning the company has provided goods or services to the customer, and when it is realizable, meaning the company expects to receive payment.
10. True/False: Question: The cash flow statement reports the cash inflows and outflows from operating, investing, and financing activities. a) True

b) False Correct Answer : a) True Rationale: The cash flow statement summarizes the cash inflows and outflows from different activities to provide insight into a company's liquidity and financial health.

11. Multiple Choice: Question: Which financial statement reports the revenues and expenses of a company over a specific period? a) Balance Sheet b) Income Statement c) Statement of Cash Flows d) Statement of Stockholders' Equity Correct Answer : b) Income Statement Rationale: The income statement reports the revenues and expenses of a company over a specific period, resulting in net income or net loss.
12. Fill-in-the-Blank:

b) Prepaid Rent c) Accounts Payable d) Common Stock Correct Answer : c) Accounts Payable Rationale: Accounts payable is a current liability representing amounts owed by a company to its creditors that are due within one year.

15. Fill-in-the-Blank: Question: Revenues increase equity through _______ while expenses decrease equity through _______. Correct Answer : Credits Debits Rationale: Revenues are recorded as credits, increasing equity, while expenses are recorded as debits, decreasing equity.
16. True/False: Question: The cash basis of accounting recognizes revenues when cash is received and expenses when cash is paid. a) True b) False

Correct Answer : a) True Rationale: The cash basis of accounting recognizes revenues and expenses when cash is exchanged, regardless of when the revenue was earned or the expense was incurred.

17. Multiple Choice: Question: Which of the following financial statements shows the changes in a company's equity over a period? a) Balance Sheet b) Income Statement c) Statement of Cash Flows d) Statement of Stockholders' Equity Correct Answer : d) Statement of Stockholders' Equity Rationale: The statement of stockholders' equity shows the changes in a company's equity accounts, including retained earnings and contributions from shareholders.
18. Fill-in-the-Blank: Question: The ending balance of the Retained Earnings account on the statement of stockholders' equity is derived from the beginning balance plus _______ and _______ minus dividends.