Intermediate Accounting Exam Questions and Verified Answers Latest Update 2024 Already Passed

Intermediate Accounting Exam Questions and Verified Answers Latest Update 2024 Already Passed Which of the following statements is true regarding accounting information systems? - Answers The kind of information that management requires of an accounting system will vary depending on the type of firm. An external event involving a transfer or exchange between two or more entities or parties is called a(n) - Answers transaction Factors that shape an accounting system include the - Answers All of the above (nature, size, volume) An example of a temporary account is - Answers Salary expense Which of the following is correct - Answers Equity = assets - liabilities The accounting equation must remain in balance - Answers throughout each step in the accounting cycle Which of the following criteria does NOT have to be met before an event or transaction should be recorded for accounting purposes? - Answers The event or transaction must be an external event Which of the following is an internal event? - Answers Using raw materials in production The book of original entry transactions and other selected events are first recorded is called the - Answers Journal The debit and credit analysis of a transaction normally takes place - Answers When the trial balance is prepared Performing a service for a client on account will - Answers Increase an asset and increase equity The account credited for a receipt of cash on account is - Answers Accounts receivable Some events are not recorded in the accounting information system because - Answers their measurement is too complex The double-entry accounting system means - Answers the dual effect of each transaction is recorded with debits and credits of equal amount Which of the following criteria must be met before an event or item should be recorded for financial purposes? - Answers The event or item is an element A trial balance - Answers Is a list of all the accounts and their balances at a specific date A trial balance will not balance if - Answers Only the debit side of a journal entry has been posted The main purpose of a trial balance is - Answers To prove the mathematical equity of debits and credits after posting Adjusting entries are necessary to - Answers -obtain a proper matching of revenue and expense -achieve an accurate statement of assets and equities If, during an accounting period, an expense item has been incurred and consumed but not yet paid for or recorded, then the end-of-period adjusting entry would involve - Answers A liability account and an expense account For adjusting entries relating to accrued revenues, - Answers Before adjustment, both assets and revenues are understated Which of the following would not be a correct form of an adjusting entry? - Answers A debit to an asset and a credit to a liability Which of the following must be considered in estimating depreciation on an asset for an accounting period - Answers Both the original cost of the asset and its useful life The type of account and normal balance of "Accumulated Depreciation, Equipment" is - Answers Contra-asset, Credit If the accountant forgets to record an adjustment for Accumulated Depreciation, Building at the end of the accounting period, this will cause - Answers An overstatement of assets An adjusting entry for bad debts will generally - Answers Increase an expense account and increase a contra-asset account An accrued revenue can be best described as an amount - Answers collected and not currently matched with expenses What account are revenues and expenses transferred to at the end of the accounting cycle? - Answers Retained earnings Zack Jones operates a sole proprietorship, selling sporting equipment. He has recently prepared financial statements for the fiscal year end of the business. Which equity accounts would you expect to see on the balance sheet? - Answers Capital and Withdrawals, grouped or added under Owner's Equity Marvin holds 10% of the common shares of Pink Limited. For the 2017 fiscal year end, all shareholders received a cash payment to represent their share in the net income of Pink Limited. How would this cash payment be reported in the equity section of Pink Limited's financial statements? - Answers as a dividend, reducing Shareholder's Equity of Pink Limited An unearned revenue can best be described as an amount - Answers collected and not currently matched with expenses Which type of account is always debited during the closing process? - Answers Revenue Which of the following statements is INCORRECT regarding fair value adjustments for investments? - Answers Both FV-NI investments and FV-OCI investments could include equity investments or investments in debt securities. In the closing process, all the revenue and expense accounts are transferred to a clearing or suspense account called - Answers Income Summary A corporation's net income or loss is closed at year end to - Answers Retained earnings A post-closing trial balance - Answers includes permanent accounts only Which of the following statements about the trial balance is correct? - Answers The debits and credits must balance If an inventory account at the end of the year is understated, the effect will be to - Answers overstate the cost of goods sold Which of the following is true regarding the traditional discounted cash flow approach? - Answers The discount rate is adjusted to accommodate the riskiness of the cash flows A fair value measure under IFRS 13 is based on which view of fair value? - Answers Market participant view In order to measure fair value under IFRS 13, an entity must determine - Answers All of the above (a) the item being measured, and how the item could or would be used. b) the market the item would be (or is) bought and sold in. c) which fair value model is being used to value the item. Under ASPE, Other Comprehensive Income (OCI) and Accumulated Other Comprehensive Income (AOCI) accounts - Answers Are not included in financial statements The main difference in the accounting for measurement issues between IFRS and ASPE is that - Answers IFRS has a well-developed framework for measuring fair values (IFRS13), whereas ASPE does not. On September 1, 2017, Brown Corp. made the annual lease payment of $12,000 for its fleet of delivery trucks. The payment covered the period September 1, 2017 to August 31, 2018. Assuming the entire amount had originally been debited to Lease Expense, the required adjustment at December 31, 2017 is - Answers Debit Prepaid Lease and credit Lease Expense $8,000. (12,0000 - (12,000 * 4 / 12) = 8,000) White Resources determines that it has NOT yet recorded the 2017 accrual for Interest Revenue to be received in 2018. Assuming the amount to be recorded for 2017 is $2,000, the required adjustment at December 31, 2017 is - Answers Debit Interest Receivable and credit Interest Revenue $2,000. On November 1, 2017, Green Corp. purchased equipment by signing a 5-month, 7% note for $120,000. The December 31, 2017 adjusting entry required in connection with this note is - Answers Debit Interest Expense and credit Interest Payable, $1,400. (120,000 * 7% * 2 / 12 = 1,400) Blue Corp.'s account balances at December 31, 2017 included Accounts Receivable, $385,000 debit; Allowance for Doubtful Accounts, $2,500 credit. From a review of the receivables, Blue estimates that $14,000 of the December 31 receivables will be uncollectible. The required adjusting entry would include a credit to the allowance account for - Answers $11,500 (14,000 - 2,500 = 11,500) Yellow Corp.'s account balances at December 31, 2017 included Accounts Receivable, $720,000 debit; Allowance for Doubtful Accounts, $800 debit. Sales during 2017 were $1,840,000. It is estimated that 2% of sales will be uncollectible. The required adjusting entry would include a credit to the allowance account for - Answers $36,800 (1,840,000 × 2% = $36,800) On September 1, 2017, Black Corporation received $36,000 cash from a tenant for one year's rent in advance, and recorded the transaction with a credit to Rent Revenue. The December 31, 2017 required adjusting entry in connection with this would be - Answers Debit Rent Revenue and credit Unearned Rent, $24,000. (8 ÷ 12 × $36,000 = $24,000) On October 31, 2017, Pink Inc. lent $42,000 to Zinc Inc. in return for a three-month, 3.5% interest-bearing note. What adjusting entry should Pink Inc. make on December 31, 2017, in connection with this note? - Answers Debit Interest Receivable and credit Interest Revenue, $245. (42,000 x 3.5% x 2 ÷ 12 = $245) Lime Limited has received its invoice for $75,000 for property taxes for the calendar year 2017. The invoice was received and paid in June 2014 and the entire amount was debited to Property Tax Expense. Assuming Lime does NOT prepare interim financial statements, the required adjustment on December 31, 2017 related to the property taxes is - Answers No adjusting entry required.