The acquisition of land by issuing common shares is

noncash transaction not reported in the cash flow statement.

Using a perpetual inventory system, the cost of freight in

increases the cost of merchandise inventory

In a limited liability partnership, a partner has unlimited liability

for the actions of employees whom they directly supervise.

In periods of rising prices, the ending inventory using the FIFO cost formula will be

higher than using the average cost method

$800,000 is invested in a privately held family corporation. What amount can you lose?

up to total investment of $800,000

Preferred shares are least likely to have which characteristic?

The right of the holder to vote at shareholders’ meetings.

Internal control helps an organization achieve all of the following EXCEPT

absolute assurance that fraud will not occur.

The closing entry for the drawings accounts will require:

a debit to the capital account.

The following explain limitations of internal control except:

If a company requires its employees to take vacations

The internal audit function is only effective when

the results are reported to senior management

should be recorded as an intangible asset.

Which of the following statements is true regarding inventory cost formulas?

A company may never change its inventory cost formula

Which of the following is NOT a necessary action a partnership must do upon death of a partner?

Discontinue business operations.

Typical cash payments classified under operating activities include all the following EXCEPT

payments to make loans to other companies.

evaluate internal controls for companies that employ them

is unique to the corporate form of business.

The post-closing trial balance will:

contain only balance sheet accounts.

Which is one of the main differences between a note payable and a bond payable?

not usually traded on a public stock exchange

In the final step of the liquidation process, remaining cash is distributed to partners

on the basis of the remaining capital balances.

After posting closing entries, the balance in the owner's capital account in the ledger will be

amount of the owner's capital reported on the balance sheet.

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BAT4M Principles of Financial Accounting Review

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A comprehensive Grade 12 Accounting review.

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Questions 40

Answers

1
Balance in owner’s drawings account after all closing entries have been posted will be equal to
the profit (or loss) for the period.
zero.
the balance in the Owner’s Capital account.
the cash withdrawn by the owner during the period.
2
The acquisition of land by issuing common shares is
noncash transaction not reported in the cash flow statement.
a cash transaction and reported in the cash flow statement.
noncash transaction reported in the cash flow statement.
only reported if using the direct method.
3
Using a perpetual inventory system, the cost of freight in
reflects the cost of delivering goods to customers
is always paid by the seller
is reflected in an expense account called Freight In
increases the cost of merchandise inventory
4
In a limited liability partnership, a partner has unlimited liability
for the actions of employees whom they directly supervise.
for only his or her share of capital contributed.
for the negligent acts of the other partners.
only during the first 5 years of the partnership.
5
A credit is NOT the normal balance for which account listed below?
Revenue account
Capital account
Drawings account
Liability account
6
Corporations have a
limited legal life.
limited life.
legal life of 20 years.
indefinite life.
7
Private companies following ASPE are required to disclose for each class of shares,
the present value per share.
the number of shares authorized.
the number of shares issued.
the market value per share.
8
Which one of the following is NOT necessary in order for a corporation to pay a cash dividend?
declaration of dividends by the board of directors
adequate cash
approval of shareholders
retained earnings
9
In periods of rising prices, the ending inventory using the FIFO cost formula will be
higher than using the average cost method
lower than average cost
the same as average cost.
can not be determined
10
Which of the following is NOT an intangible asset that is reported on the balance sheet?
employees
goodwill
trademarks
copyrights
11
$800,000 is invested in a privately held family corporation. What amount can you lose?
up to total investment of $800,000
$400,000
the $800,000 plus any personal assets the creditors demand
zero
12
The exclusive right to publish and sell artistic or published work is called a:
patent.
license.
copyright.
trademark.
13
Preferred shares are least likely to have which characteristic?
Preference as to assets upon liquidation of the corporation.
The right of the corporation to redeem or retire the shares.
Preference as to dividends.
The right of the holder to vote at shareholders’ meetings.
14
The first required step in the accounting cycle is
analyzing transactions.
journalizing transactions in the book of original entry.
posting transactions
reversing entries
15
Internal control helps an organization achieve all of the following EXCEPT
compliance with relevant laws and regulations.
effective and efficient operations.
reliable financial reporting.
absolute assurance that fraud will not occur.
16
The closing entry for the drawings accounts will require:
a credit to the capital account.
a debit to income summary.
a debit to the capital account.
a debit to the drawings account.
17
The following explain limitations of internal control except:
Collusion occurring between two or more employees
Lack of proper employee training
If a company requires its employees to take vacations
The size of company makes segregation of duties difficult
18
The feature that enables preferred shareholders to exchange preferred shares for common shares
convertible feature
participating feature
cumulative preference
redeemable feature
19
Which one would not likely employ the specific identification method for inventory costing?
Farm implements dealership
Drug store
Antique shop
Art Gallery
20
The internal audit function is only effective when
independent checks are carried out on a regular basis
control tasks are properly performed
the results are reported to senior management
reports are filed with the CICA
21
An adjusting entry is NOT required for
outstanding cheques
bank service charges
NSF cheques
EFT collections
22
Bank errors
must be corrected by the bank
must be corrected by debits
occur because of time lags
are corrected by making an adjusting entry on the depositor
23
The revenue recognition criteria states that revenue of a business is recognized
when it is earned.
at the end of the year.
when the expenses to earn that revenue are incurred.
when cash is received.
24
Goodwill
can be sold by itself to another company.
should be recorded as an intangible asset.
can be purchased and charged directly to owner’s equity.
may be expensed upon purchase if desired.
25
Purchased merchandise with freight terms of FOB destination. The freight costs will be paid by
the seller
the buyer and the seller
the transportation company
the buyer
26
Which of the following statements is true regarding inventory cost formulas?
A company must use the same method for domestic and foreign
A company must comply with the method specified by industry
A company may use more than one cost formula concurrently
A company may never change its inventory cost formula
27
Which of the following is NOT a necessary action a partnership must do upon death of a partner?
Determine the profit or loss for the year to date.
Discontinue business operations.
Close the books.
Prepare financial statements.
28
Net credit sales are normally sold on terms of 2/10, n/30. The collection period is:
10 days
2 days
30 days
60 days
29
Typical cash payments classified under operating activities include all the following EXCEPT
payments to employees for services.
payments to lenders for interest.
payments to suppliers for inventory.
payments to make loans to other companies.
30
Internal auditors
cannot evaluate the internal controls of the company
are employees of CRA who evaluate the internal controls
evaluate internal controls for companies that employ them
are hired by CA firms to audit business firms
31
Retained earnings
is closed at the end of the year.
reflects cash paid in by shareholders to date.
is an optional account in the partnership form of business.
is unique to the corporate form of business.
32
Recording estimated warranty expense in the year of the sale is best known as?
Full disclosure of relevant information
Matching expenses with revenue
Consistency of accounting policies
Recording all material items in the Financial Statements
33
The post-closing trial balance will:
be prepared before closing entries are posted to the ledger.
contain only balance sheet accounts.
contain only income statement accounts
contain both income statement and balance sheet accounts.
34
Which is one of the main differences between a note payable and a bond payable?
not usually traded on a public stock exchange
a fixed maturity date
interest payments
security
35
Within a corporation, formal approval is required before bonds can be issued by the
controller.
board of directors.
provincial government.
chief executive officer.
36
Which one of the following would NOT be considered an advantage of the corporation?
Separate legal existence
Continuous life
Limited liability of owners
Government regulation
37
In the final step of the liquidation process, remaining cash is distributed to partners
on the basis of the profit ratios.
on the basis of the remaining capital balances.
regardless of capital deficiencies.
on an equal basis.
38
After posting closing entries, the balance in the owner's capital account in the ledger will be
amount of the owner's capital reported on the balance sheet.
the profit (or loss) for the period.
zero.
the beginning owner's capital on the statement of OE.
39
All of the following items are characteristics of a corporation except:
transferable ownership rights.
limited life.
separate legal existence.
ability to acquire capital.
40
Recording accrued interest on a note payable would include a:
debit to notes payable.
debit to interest payable.
debit to interest expense.
credit to notes payable.

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