Financial Accounting Final Questions with Detailed Verified Answers

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Financial Accounting Final Questions
with Detailed Verified Answers

Question: Accounting is
Answer: Language of business, measures business activities, & processes data
into reports and communicates the data to decision-makers


Question:The 2 types of accounting
Answer: Financial and managerial


Question:The accounting assumption that states that the business, rather
than its owners, is the reporting unit is the
Answer: Entity assumption


Question:Stable-monetary-unit assumption
Answer: Enables accountants to ignore the effect of inflation on the
accounting records.


Question:A construction company paid $82,000 cash for land used in the
business. At the time of purchase, the land had a list price of $90,000. When
the balance sheet was prepared, the fair value of the land was $85,000. At
what amount should the land be reported on the balance sheet of the
company?
Answer: $82,000 (Historical cost principle)

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Question:All of the following are expenses EXCEPT for
Answer: Dividends


Question:The accounting equation
Answer: Assets -Liabilities = Stockholders' Equity.
or
Assets = Liabilities + Stockholders' Equity


Question:Liabilities are
Answer: Debts payable to outsiders called creditors


Question:The assets of a company
Answer: Represent economic resources that are expected to produce a future
benefit.


Question:The major types of transactions that affect retained earnings are
Answer: Revenues, expenses, and dividends.


Question:Net income
Answer: Is often referred to as the "bottom line" on an income statement


Question:Revenues
Answer: Increases in retained earnings resulting from delivering goods or
services to customers.

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Question:Revenues were $150,000, expenses were $144,000, and cash
dividends declared and paid were $3000. What were the net income and the
change in retained earnings for the period?
Answer: Net income was $6000; the change in retained earnings was $3000.
Net income = $150,000 - $144,000 = $6000


Question:Michael Company reports Total Assets of $254,000, Common Stock
of $50,000, and Retained Earnings of $94,000. What are total liabilities at the
end of the first year?
Answer: $110,000
Total Assets $254,000 — (Common Stock $50,000 + Retained Earnings
$94,000) = $110,000


Question:The CORRECT data flow from one financial statement to the next is
Answer: Income statement, statement of retained earnings, balance sheet,
statement of cash flows.


Question:Which statement(s) reports the revenues, gains, expenses, and
losses of an entity?
Answer: Income statement


Question:The portion of net income that the company has kept over a period
of years and not used for dividends is called
Answer: Retained earnings


Question:A company completed the following transactions during the month
of October: