Financial Accounting Quiz Questions and Answers

Question 1

A transaction can decrease two accounts.

True

False

Question 2

During the closing process, expenses are reset to zero with a credit.

True

False

Question 3

The accrual basis of accounting generally does not provide a more complete picture of economic reality than the cash basis of accounting.

True

False

Question 4

United Airlines spends $100 million in cash to obtain gate rights for the next five years at Reagan National airport. This outflow is reported in the operating section of the cash flow section.

True

False

Question 5

All else equal, firms using double-declining balance depreciation will generally report fixed assets that appear younger (i.e., lower percent depreciated) than firms using straight-line depreciation.

True

False

Question 6

Kellogg's disclosed a substantial LIFO liquidation in 2020. To forecast 2021 performance, assuming no further liquidation, you should predict that 2021 will have higher cost of goods sold relative to the cost of goods sold for 2020.

True

False

Question 7

A company that underestimates Bad Debt expense during the year will present a balance in the Owner's Equity section of the Balance Sheet that is understated.

True

False

Question 8

The Income Statement is dated over the period of time covered, such as For the Year Ended December 31, 2020.

True

False

Question 9

Accumulated Depreciation on the Balance Sheet always equals Depreciation Expense for the year on the Income Statement.

True

False

Question 10

In order to raise revenue. the US government should encourage companies to use FIFO for tax expense.

True

False

Question 11

Copy of Which of the following is LEAST helpful in trying to assess the financial performance of General Mills Inc.?

A Reading management's discussion and analysis in the 10-K
B Analyzing the information in the footnotes of the financial statements.
C Comparing General Mills Inc.'s sales growth to the sales growth of its competitors.
D Preparing for the upcoming Saint Patrick's day by eating Lucky Charm’s cereal.

Question 12

Which of the following is a temporary account?

1. Retained earnings

2. Unearned revenue

3. Accumulated depreciation

4. Prepaid expenses

5. None of the above are temporary accounts.

QUESITON 13

Willis Towers Watson had current liabilities of $16,070 and equity of $10,369 on December 31, 2019. The assets totaled $35,426. How much did Willis Towers Watson have in long-term liabilities on December 31, 2019? (all numbers in millions)

1. $19,356

2. $8,987

Question 2

3. $25,057

4. $5,701

5. None of the above equals the long-term liabilities of Willis Towers Watson

QUESITON 14

Booze Allen Hamilton (NYSE: BAH) is a publicly-traded company which provides consulting services, primarily to the federal government. It is headquartered in McLean, Virginia. Lockheed Martin:

1. Must prepare its financial statements in accordance with U.S. GAAP.

2. Is not required to prepare financial statements.

3. May prepare its financial statements using either IFRS or U.S. GAAP.

4. Must prepare its financial statements in accordance with government accounting standards.

5. Must prepare its financial statements in accordance with IFRS.

Question 15

Tootsie Roll Industries sold equipment with an original cost of $30,000 and accumulated depreciation of $12,300 (book value of $17,700), realizing a gain of $3,500. The journal entry to record this sale includes all of the following except:

1. Credit to equipment of $30,000

2. Debit to cash of $21,200

3. Debit to accumulated depreciation of $12,300

4. Debit gain on sale $3,500

5. All of the above are included in the journal entry to record the sale

Question 16

Song Bird Software sells HVAC software systems to private customers for $11,500 cash per unit (on average). The purchase price includes bi-annual updates for the first two years. The undelivered elements represent approximately 85% of the purchase price. At the time of the sale, the journal entry that Song Bird should record includes:

1. A credit to cash for $11,500

2. A credit to revenue for $11,500

3. A credit to revenue for $9,775 and a credit to unearned revenue for $1,725

4. A credit to unearned revenue for $11,500

5. A debit to contra revenue for $1,725 and a debit to cash for $9,775

6. A credit to revenue for $1,725 and a credit to unearned revenue for $9,775

Question 17

McKesson Corporation reported LIFO reserve of $444 million on 3/31/2020 and $696 million on 3/31/2019. The decrease in the reserve may have resulted because

1. Input prices increased from 2019 to 2020

2. Input prices decreased from 2019 to 2020

3. The company sold more inventory than it purchased in 2020

4. The company purchased more inventory than it purchased in 2020

5. Both A and D

6. Both B and C

Question 18

Panera purchased ovens for $200,000 on January 1, 2020. The equipment is estimated to have a useful life of 10 years and a residual value of $5,000. Panera uses the double-declining balance depreciation method. What is the depreciation expense for the equipment for the year ended December 31, 2021?

Question 3

1. $128,000

2. $19,600

3. $32,000

4. $40,000

5. $260,000

Question 19

During the year ended December 31, 2021, Biogen, a biotech company, misstated key financial information and reported millions of dollars of expenses in "Cost of Goods Sold" rather than "Research and " This improper classification on the income statement had the effect of decreasing:

1. Gross Profit

2. Net Income

3. Operating Income

4. Net Sales Revenue

5. All of the above

6. None of the above

Question 20

The Chicago Bulls just announced and began selling season's tickets for the 2022-2023 basketball season. The season tickets are sold for $3,810. This season ticket pass include tickets to 30 home games that will take place November 2022 through May 2023. The Chicago Bulls collects the money when customers reserve their season's tickets. When will the Bulls record revenue and for what amount? Please explain your answer.

Question 21

Wyndham Destinations is an American timeshare company headquartered in Orlando, Florida. It develops, sells, and manages timeshare properties under several vacation ownership clubs, including Club Wyndham and WorldMark by Wyndham. On December 31, 2020, Wyndham had Total (gross) Property, Plant and Equipment of $1,724 (in millions) and Accumulated Depreciation of $944 (in millions). Because performance will be low during 2021, Wyndham would like to take a big bath and report higher expenses. How could Wyndham change two assumptions, related to property, plant and equipment, to increase the related expense?

Question 22

Eventbrite’s mission is to bring the world together through live "We believe live experiences are fundamental to fulfilling a human desire to connect." The company is currently selling tickets for The Skokie Theater's "Welcome Back" concert on July 1, 2021. Eventbrite provides

a platform to sell tickets to attendees. Event attendees pay an additional 2% processing fee, on top of the face value of the ticket, to cover these costs. Eventbrite collects the face value of the ticket plus the processing fee at the time of sale. During February 2021, the company sold tickets with a face value of $5,000. Please describe the timing and amount that Eventbrite will record revenue.

Question 23

Value for Less Decor Inc. is an American furniture chain with about 300 stores across the United States, Canada, Europe, the Middle East, and Asia. It was founded in 1932 by two brothers.

The following information was included on Value for Less's' Financial Statements for the year ended June 30, 2021. This is NOT a trial balance. It is a list of accounts as they appeared on the balance sheet and income statement as of and for the year ended June 30, 2021. All amounts represent normal balances (e.g., accounts payable has a credit balance of $25,595). Note that the Retained Earnings balance is the ending retained earnings.

Value for Less Decor declared dividends of $16,394 during the year ended June 30, 2020. What is Net Income for the fiscal year ended June 30, 2021? (Provide details)

Accounts payable	25,595	Inventory	127,790
Accounts receivable	10,857	Long-term debt	155,747
Accrued expenses	18,534	Other current liabilities	31,074
Accumulated depreciation	329,884	Prepaid epenses	23,483
Allocance for doubtful accounts	550	Property, plant and equipment	675,904
Cash	72,276	Retained earnings	630,189
Common stock	380,750	Revenues	589,837
Cost of sales	300,805	SGA expense	252,700
Deferred revenues	64,031	Tax expense	5,289
Intangible assets	45,128	Treasury stock	680,916
Interest expense	2,300

Question 24

The company estimates that 5% of its credit sales in June 2021 will be deemed uncollectible over the next few According to GAAP, should the effect of these uncollectible receivables be recorded in the financial statements (i.e., the Income Statement) for the Year ended June 30, 2021 or for the Year ended June 30, 2022? Briefly explain your answer.

Question 25

com sells products of all of the major sports leagues as well as player jerseys. Fanatics pays a 9% royalty on the related sales. During fiscal year 2021, Fanatics sold $36,000 of licensed products; the inventory cost of these sales was $19,325. The company has not paid any cash royalties yet related to these sales. Prepare the journal entries that Fanatics.com made in 2021 related to