FAC1601 2026 EXAM QUESTIONS AND
SOLUTIONS GRADED A PLUS PREMIUM
REVIEW PACK
◉ Who are the primary users of financial accounting information?
Answer: Lenders, investors, company management, suppliers,
customers, employees, competitors, government agencies,
politicians, and the press.
◉ What organization establishes U.S. accounting rules?
Answer: The Financial Accounting Standards Board (FASB).
◉ Name two other important accounting-related organizations.
Answer: The Securities and Exchange Commission (SEC) and the
American Institute of Certified Public Accountants (AICPA).
◉ What three factors are causing significant changes in accounting
today?
Answer: Rapid advances in information technology, international
integration of business, and increased scrutiny from corporate
accounting scandals.
,◉ What was Ray Kroc's initial interest in McDonald's?
Answer: He wanted to understand why a single hamburger stand
needed ten milkshake machines.
◉ What was the first addition to the McDonald's menu?
Answer: The Filet-O-Fish sandwich in the early 1960s.
◉ What was the effective annual interest rate on Kroc's loan for the
McDonald's buyout?
Answer: Nearly 50 percent.
◉ What was the total sales for all McDonald's restaurants in 2012?
Answer: $88.3 billion.
◉ What was McDonald's reported net income for 2012?
Answer: $5.465 billion.
◉ What is the estimated economic value of the McDonald's brand
name?
Answer: $40.1 billion.
,◉ What is the primary purpose of financial statements?
Answer: To summarize and report the economic activity of a
company.
◉ What are the three main financial statements?
Answer: The balance sheet, the income statement, and the statement
of cash flows.
◉ What does 'cash flow' refer to in accounting?
Answer: The net amount of cash being transferred into and out of a
business.
◉ What does the term 'off-balance-sheet' mean?
Answer: Items that are not recorded on the balance sheet but may
still affect the financial position of a company.
◉ What is 'return on equity'?
Answer: A measure of financial performance calculated by dividing
net income by shareholders' equity.
◉ How did Kroc adapt the McDonald's system for nationwide use?
Answer: By making hundreds of unapproved changes to the original
Speedee System.
, ◉ What was the price at which Kroc bought out the McDonald
brothers?
Answer: $2.7 million.
◉ What were the original items on the McDonald's menu?
Answer: Hamburgers, french fries, milkshakes, cheeseburgers, soft
drinks, milk, coffee, potato chips, and pie.
◉ What is the significance of judgment in accounting?
Answer: Accountants must exercise judgment to summarize and
report business transactions effectively.
◉ What does the term 'leverage' refer to in business?
Answer: The use of borrowed capital to increase the potential return
on investment.
◉ What is a derivative in the financial context?
Answer: A financial instrument whose value is derived from the
value of an underlying asset.
◉ What is the role of accountants in financial reporting?
SOLUTIONS GRADED A PLUS PREMIUM
REVIEW PACK
◉ Who are the primary users of financial accounting information?
Answer: Lenders, investors, company management, suppliers,
customers, employees, competitors, government agencies,
politicians, and the press.
◉ What organization establishes U.S. accounting rules?
Answer: The Financial Accounting Standards Board (FASB).
◉ Name two other important accounting-related organizations.
Answer: The Securities and Exchange Commission (SEC) and the
American Institute of Certified Public Accountants (AICPA).
◉ What three factors are causing significant changes in accounting
today?
Answer: Rapid advances in information technology, international
integration of business, and increased scrutiny from corporate
accounting scandals.
,◉ What was Ray Kroc's initial interest in McDonald's?
Answer: He wanted to understand why a single hamburger stand
needed ten milkshake machines.
◉ What was the first addition to the McDonald's menu?
Answer: The Filet-O-Fish sandwich in the early 1960s.
◉ What was the effective annual interest rate on Kroc's loan for the
McDonald's buyout?
Answer: Nearly 50 percent.
◉ What was the total sales for all McDonald's restaurants in 2012?
Answer: $88.3 billion.
◉ What was McDonald's reported net income for 2012?
Answer: $5.465 billion.
◉ What is the estimated economic value of the McDonald's brand
name?
Answer: $40.1 billion.
,◉ What is the primary purpose of financial statements?
Answer: To summarize and report the economic activity of a
company.
◉ What are the three main financial statements?
Answer: The balance sheet, the income statement, and the statement
of cash flows.
◉ What does 'cash flow' refer to in accounting?
Answer: The net amount of cash being transferred into and out of a
business.
◉ What does the term 'off-balance-sheet' mean?
Answer: Items that are not recorded on the balance sheet but may
still affect the financial position of a company.
◉ What is 'return on equity'?
Answer: A measure of financial performance calculated by dividing
net income by shareholders' equity.
◉ How did Kroc adapt the McDonald's system for nationwide use?
Answer: By making hundreds of unapproved changes to the original
Speedee System.
, ◉ What was the price at which Kroc bought out the McDonald
brothers?
Answer: $2.7 million.
◉ What were the original items on the McDonald's menu?
Answer: Hamburgers, french fries, milkshakes, cheeseburgers, soft
drinks, milk, coffee, potato chips, and pie.
◉ What is the significance of judgment in accounting?
Answer: Accountants must exercise judgment to summarize and
report business transactions effectively.
◉ What does the term 'leverage' refer to in business?
Answer: The use of borrowed capital to increase the potential return
on investment.
◉ What is a derivative in the financial context?
Answer: A financial instrument whose value is derived from the
value of an underlying asset.
◉ What is the role of accountants in financial reporting?
