ACG 3101 Financial Accounting & Reporting
Full Finals Exam Review (Qns & Ans)
2025
1. Multiple Choice
A company reports inventory using the FIFO method during
periods of rising prices. How will this choice impact its financial
statements?
A. Higher cost of goods sold and lower ending inventory
B. Lower cost of goods sold and higher ending inventory
C. Higher total expenses and lower net income
D. Lower taxes and higher cost of goods sold
ANS: B. Lower cost of goods sold and higher ending inventory
©2025
, Rationale: Under FIFO, the oldest inventory costs are matched
against revenue, resulting in lower cost of goods sold and higher
ending inventory during periods of rising prices.
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2. Fill-in-the-Blank
_ is the principle that revenue is recognized when it is earned,
regardless of when cash is received.
ANS: Revenue recognition
Rationale: The revenue recognition principle ensures that
income is recorded in the period in which it is earned, promoting
accurate financial reporting.
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3. True/False
Contingent liabilities are recognized in the financial statements
only when they are probable and can be reasonably estimated.
ANS: True
©2025
, Rationale: Only probable and measurable contingent liabilities
are reported in the financial statements to ensure they reflect
reliable information.
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4. Multiple Response
Which are examples of non-current assets in financial reporting?
(Select all that apply.)
A. Land
B. Accounts receivable
C. Buildings
D. Goodwill
ANS: A, C, D
Rationale: Non-current assets, such as land, buildings, and
goodwill, are long-term investments that are not expected to be
converted into cash within one year.
---
5. Multiple Choice
©2025
, A company issues bonds at a premium. How is this accounted for
on the balance sheet?
A. As a reduction of bond liabilities
B. As an increase to bond liabilities
C. As a current liability
D. As additional paid-in capital
ANS: B. As an increase to bond liabilities
Rationale: Bonds issued at a premium are recorded as a
liability along with the premium amount, which is amortized over
the bond term.
---
6. Fill-in-the-Blank
_ is the process of allocating the cost of an intangible asset over
its useful life.
ANS: Amortization
Rationale: Amortization systematically allocates the cost of
intangible assets, such as patents or trademarks, over their
estimated useful lives.
©2025
Full Finals Exam Review (Qns & Ans)
2025
1. Multiple Choice
A company reports inventory using the FIFO method during
periods of rising prices. How will this choice impact its financial
statements?
A. Higher cost of goods sold and lower ending inventory
B. Lower cost of goods sold and higher ending inventory
C. Higher total expenses and lower net income
D. Lower taxes and higher cost of goods sold
ANS: B. Lower cost of goods sold and higher ending inventory
©2025
, Rationale: Under FIFO, the oldest inventory costs are matched
against revenue, resulting in lower cost of goods sold and higher
ending inventory during periods of rising prices.
---
2. Fill-in-the-Blank
_ is the principle that revenue is recognized when it is earned,
regardless of when cash is received.
ANS: Revenue recognition
Rationale: The revenue recognition principle ensures that
income is recorded in the period in which it is earned, promoting
accurate financial reporting.
---
3. True/False
Contingent liabilities are recognized in the financial statements
only when they are probable and can be reasonably estimated.
ANS: True
©2025
, Rationale: Only probable and measurable contingent liabilities
are reported in the financial statements to ensure they reflect
reliable information.
---
4. Multiple Response
Which are examples of non-current assets in financial reporting?
(Select all that apply.)
A. Land
B. Accounts receivable
C. Buildings
D. Goodwill
ANS: A, C, D
Rationale: Non-current assets, such as land, buildings, and
goodwill, are long-term investments that are not expected to be
converted into cash within one year.
---
5. Multiple Choice
©2025
, A company issues bonds at a premium. How is this accounted for
on the balance sheet?
A. As a reduction of bond liabilities
B. As an increase to bond liabilities
C. As a current liability
D. As additional paid-in capital
ANS: B. As an increase to bond liabilities
Rationale: Bonds issued at a premium are recorded as a
liability along with the premium amount, which is amortized over
the bond term.
---
6. Fill-in-the-Blank
_ is the process of allocating the cost of an intangible asset over
its useful life.
ANS: Amortization
Rationale: Amortization systematically allocates the cost of
intangible assets, such as patents or trademarks, over their
estimated useful lives.
©2025
