FA Final Exam Study Guide 2023
Breeze Inc. receives payment of $800,000 for 4 wind turbines that were delivered
and invoiced on credit in the previous month. How would this receipt impact the
accounting equation of Breeze Inc.? - CORRECT ANSWER-Assets increase by
$800,000 because the company receives cash, and assets also decrease by
$800,000 because the company no longer has a right to receive the cash (the
receivable previously recorded at the time of the sale).
Which of the following would cause a decrease to liabilities? Select all that apply.
A company pays $550, which is the current portion due on a long term bank loan
A company sells $1,000 worth of gift cards
A company prepays for 12 months of landscaping services
A company pays off the remaining amount of their mortgage loan
After one month, a company recognizes revenue equal to 1/12 of an annual
magazine subscription they sold to a customer - CORRECT ANSWER-A company
pays $550, which is the current portion due on a long term bank loan
A company pays off the remaining amount of their mortgage loan
After one month, a company recognizes revenue equal to 1/12 of an annual
magazine subscription they sold to a customer
Leak Geeks, a plumbing supply company, sold $25,000 of plumbing supplies to one
of their larger customers. The supplies had an inventory value of $12,000. How will
the revenue and cash inflow from this transaction impact the accounting equation of
Leak Geeks? How will the related expense from this transaction impact the
accounting equation of Leak Geeks? - CORRECT ANSWER-First, assets increase
by $25,000 because the company now has that amount of cash, and owners' equity
increases by $25,000 to recognize the revenue associated with the sale.
At the same time, assets decrease by $12,000 because the company no longer has
the supplies, and owners' equity decreases by $12,000 to recognize the expense
associated with the sale.
Cakery Bakery receives $1,000 from a customer on August 5, 2016 for a wedding
cake to be delivered on September 19, 2016. What would Cakery Bakery record on
their books when they receive this payment? - CORRECT ANSWER-The correct
answer is to debit Cash (an asset) for $1,000 as the company now has the cash and
credit Deferred Revenue (a liability) for $1,000 as the company now has an
obligation to provide services in the future.
Which of the following is TRUE regarding journal entries:
There are always only two accounts affected
,The total amount debited must equal the total amount credited
Journal entries show debits on the right and credits on the left
Journal entries show credits first, then debits - CORRECT ANSWER-The total
amount debited must equal the total amount credited
Wise Guys Consulting issues an invoice for $9,000 to one of their clients for services
provided. The terms of the invoice call for payment 30 days after the invoice date.
What would be the impact at the date the services are completed and invoiced? -
CORRECT ANSWER-The correct answer is to debit Accounts Receivable (an asset)
for $9,000 as the company now has the right to receive cash, and credit Revenue
(part of owners' equity) for $9,000 to recognize the revenue associated with the sale.
Friends International is an NGO that fosters greater cultural awareness and
understanding by arranging for people of different backgrounds to spend time in
other countries and cultures. On January 1, 2014 they purchase $80,000 of open
airline tickets in advance that can be used for a variety of destinations because they
need the flexibility and savings provided by such tickets. What entry should Friends
International make to record this purchase? - CORRECT ANSWER-The correct
answer is to debit Prepaid Expense for $80,000 as the company now has the right to
receive benefits from the prepaid tickets and credit Cash for $80,000 as the
company no longer has the cash.
Which of the following is FALSE regarding Accrual Accounting?
Revenues are recorded when earned
Accrual accounting follows the matching principle
Expenses are recorded as incurred
Transactions are only recorded when there is an exchange of cash - CORRECT
ANSWER-Transactions are only recorded when there is an exchange of cash
Friends International is an NGO that fosters greater cultural awareness and
understanding by arranging for people of different backgrounds to spend time in
other countries and cultures. On January 1, 2014 they purchased $80,000 of open
airline tickets in advance that can be used for a variety of destinations. Using the
accrual method, build the entry to record the use of $40,000 of these tickets on
March 15, 2014 for multiple passengers on a flight from New York to Kigali, Rwanda.
- CORRECT ANSWER-The correct answer is to debit Travel Expense for $40,000 to
recognize the expense associated with the use of the tickets and credit Prepaid
Expense for $40,000 as the company no longer has the right to receive benefits from
the prepaid tickets.
Cakery Bakery received $1,000 from a customer on August 5, 2016 for a wedding
cake to be delivered on September 19, 2016. What would Cakery Bakery record on
their books when the cake is successfully delivered? - CORRECT ANSWER-The
, correct answer is to debit Deferred Revenue (a liability) for $1,000 as the company
no longer has an obligation to provide services and credit Revenue (part of owners'
equity) for $1,000 to recognize the revenue associated with the sale.
Traxx is a shoe manufacturer. They sold 250 pairs of shoes on credit to Feet of
Endurance (FOE) for $16,000. The total manufactured cost of the shoes was $7,000.
What is the journal entry to record the revenue on the books of Traxx? - CORRECT
ANSWER-The correct answer is to debit Accounts Receivable for $16,000 as the
company now has the right to receive cash and credit Revenue for $16,000 to
recognize the revenue associated with the sale.
Wise Guys Consulting receives payment in full totaling $9,000 from a client for
services which were rendered and invoiced the previous month. What would be the
impact at the time the payment is received? - CORRECT ANSWER-The correct
answer is to debit Cash (an asset) for $9,000 as the company now has the cash and
credit Accounts Receivable (also an asset) for $9,000 as the company no longer has
the right to receive cash.
Keep You in the Know (KYK) magazine received $120,000 cash in annual
subscriptions in December 2013. KYK is a monthly publication and all of these
subscriptions commence in January 2014. What entry should KYK make on January
31, 2014 related to the subscription services provided for one month? - CORRECT
ANSWER-The correct answer is to debit Deferred Revenue for $10,000 as the
company no longer has the liability for one month's worth of subscription, and credit
Revenue for $10,000 to recognize the revenue associated with one month's worth of
services provided.
Traxx is a shoe manufacturer. They sold 250 pairs of shoes on credit to Feet of
Endurance (FOE) for $16,000. The total manufactured cost of the shoes was $7,000.
What is the journal entry to record the cost of the inventory transfer on the books of
Traxx? - CORRECT ANSWER-The correct answer is to debit Cost of Goods Sold for
$7,000 to recognize the expense associated with the sale of shoes, and credit
Inventory for $7,000 as the company no longer has the inventory.
Company A's accounting period goes from January 1 through December 31. Which
of the following describes the difference between the trial balance on December 31,
2013 and the trial balance on January 1, 2014?
The trial balance on January 1, 2014 does not balance because all nominal accounts
were reset in the closing process.
The trial balance on January 1, 2014 does not balance because the company has
not yet earned any income for the period.
The trial balance on January 1, 2014 shows no balance in all nominal accounts
because they were closed to retained earnings in the closing process.
The trial balance on January 1, 2014 shows no balance in all accounts because the
accounting books were reset in the closing process. - CORRECT ANSWER-The trial
Breeze Inc. receives payment of $800,000 for 4 wind turbines that were delivered
and invoiced on credit in the previous month. How would this receipt impact the
accounting equation of Breeze Inc.? - CORRECT ANSWER-Assets increase by
$800,000 because the company receives cash, and assets also decrease by
$800,000 because the company no longer has a right to receive the cash (the
receivable previously recorded at the time of the sale).
Which of the following would cause a decrease to liabilities? Select all that apply.
A company pays $550, which is the current portion due on a long term bank loan
A company sells $1,000 worth of gift cards
A company prepays for 12 months of landscaping services
A company pays off the remaining amount of their mortgage loan
After one month, a company recognizes revenue equal to 1/12 of an annual
magazine subscription they sold to a customer - CORRECT ANSWER-A company
pays $550, which is the current portion due on a long term bank loan
A company pays off the remaining amount of their mortgage loan
After one month, a company recognizes revenue equal to 1/12 of an annual
magazine subscription they sold to a customer
Leak Geeks, a plumbing supply company, sold $25,000 of plumbing supplies to one
of their larger customers. The supplies had an inventory value of $12,000. How will
the revenue and cash inflow from this transaction impact the accounting equation of
Leak Geeks? How will the related expense from this transaction impact the
accounting equation of Leak Geeks? - CORRECT ANSWER-First, assets increase
by $25,000 because the company now has that amount of cash, and owners' equity
increases by $25,000 to recognize the revenue associated with the sale.
At the same time, assets decrease by $12,000 because the company no longer has
the supplies, and owners' equity decreases by $12,000 to recognize the expense
associated with the sale.
Cakery Bakery receives $1,000 from a customer on August 5, 2016 for a wedding
cake to be delivered on September 19, 2016. What would Cakery Bakery record on
their books when they receive this payment? - CORRECT ANSWER-The correct
answer is to debit Cash (an asset) for $1,000 as the company now has the cash and
credit Deferred Revenue (a liability) for $1,000 as the company now has an
obligation to provide services in the future.
Which of the following is TRUE regarding journal entries:
There are always only two accounts affected
,The total amount debited must equal the total amount credited
Journal entries show debits on the right and credits on the left
Journal entries show credits first, then debits - CORRECT ANSWER-The total
amount debited must equal the total amount credited
Wise Guys Consulting issues an invoice for $9,000 to one of their clients for services
provided. The terms of the invoice call for payment 30 days after the invoice date.
What would be the impact at the date the services are completed and invoiced? -
CORRECT ANSWER-The correct answer is to debit Accounts Receivable (an asset)
for $9,000 as the company now has the right to receive cash, and credit Revenue
(part of owners' equity) for $9,000 to recognize the revenue associated with the sale.
Friends International is an NGO that fosters greater cultural awareness and
understanding by arranging for people of different backgrounds to spend time in
other countries and cultures. On January 1, 2014 they purchase $80,000 of open
airline tickets in advance that can be used for a variety of destinations because they
need the flexibility and savings provided by such tickets. What entry should Friends
International make to record this purchase? - CORRECT ANSWER-The correct
answer is to debit Prepaid Expense for $80,000 as the company now has the right to
receive benefits from the prepaid tickets and credit Cash for $80,000 as the
company no longer has the cash.
Which of the following is FALSE regarding Accrual Accounting?
Revenues are recorded when earned
Accrual accounting follows the matching principle
Expenses are recorded as incurred
Transactions are only recorded when there is an exchange of cash - CORRECT
ANSWER-Transactions are only recorded when there is an exchange of cash
Friends International is an NGO that fosters greater cultural awareness and
understanding by arranging for people of different backgrounds to spend time in
other countries and cultures. On January 1, 2014 they purchased $80,000 of open
airline tickets in advance that can be used for a variety of destinations. Using the
accrual method, build the entry to record the use of $40,000 of these tickets on
March 15, 2014 for multiple passengers on a flight from New York to Kigali, Rwanda.
- CORRECT ANSWER-The correct answer is to debit Travel Expense for $40,000 to
recognize the expense associated with the use of the tickets and credit Prepaid
Expense for $40,000 as the company no longer has the right to receive benefits from
the prepaid tickets.
Cakery Bakery received $1,000 from a customer on August 5, 2016 for a wedding
cake to be delivered on September 19, 2016. What would Cakery Bakery record on
their books when the cake is successfully delivered? - CORRECT ANSWER-The
, correct answer is to debit Deferred Revenue (a liability) for $1,000 as the company
no longer has an obligation to provide services and credit Revenue (part of owners'
equity) for $1,000 to recognize the revenue associated with the sale.
Traxx is a shoe manufacturer. They sold 250 pairs of shoes on credit to Feet of
Endurance (FOE) for $16,000. The total manufactured cost of the shoes was $7,000.
What is the journal entry to record the revenue on the books of Traxx? - CORRECT
ANSWER-The correct answer is to debit Accounts Receivable for $16,000 as the
company now has the right to receive cash and credit Revenue for $16,000 to
recognize the revenue associated with the sale.
Wise Guys Consulting receives payment in full totaling $9,000 from a client for
services which were rendered and invoiced the previous month. What would be the
impact at the time the payment is received? - CORRECT ANSWER-The correct
answer is to debit Cash (an asset) for $9,000 as the company now has the cash and
credit Accounts Receivable (also an asset) for $9,000 as the company no longer has
the right to receive cash.
Keep You in the Know (KYK) magazine received $120,000 cash in annual
subscriptions in December 2013. KYK is a monthly publication and all of these
subscriptions commence in January 2014. What entry should KYK make on January
31, 2014 related to the subscription services provided for one month? - CORRECT
ANSWER-The correct answer is to debit Deferred Revenue for $10,000 as the
company no longer has the liability for one month's worth of subscription, and credit
Revenue for $10,000 to recognize the revenue associated with one month's worth of
services provided.
Traxx is a shoe manufacturer. They sold 250 pairs of shoes on credit to Feet of
Endurance (FOE) for $16,000. The total manufactured cost of the shoes was $7,000.
What is the journal entry to record the cost of the inventory transfer on the books of
Traxx? - CORRECT ANSWER-The correct answer is to debit Cost of Goods Sold for
$7,000 to recognize the expense associated with the sale of shoes, and credit
Inventory for $7,000 as the company no longer has the inventory.
Company A's accounting period goes from January 1 through December 31. Which
of the following describes the difference between the trial balance on December 31,
2013 and the trial balance on January 1, 2014?
The trial balance on January 1, 2014 does not balance because all nominal accounts
were reset in the closing process.
The trial balance on January 1, 2014 does not balance because the company has
not yet earned any income for the period.
The trial balance on January 1, 2014 shows no balance in all nominal accounts
because they were closed to retained earnings in the closing process.
The trial balance on January 1, 2014 shows no balance in all accounts because the
accounting books were reset in the closing process. - CORRECT ANSWER-The trial
