1. Which of the following best describes the Financial Accounting Standards Board (FASB)?
A. The FASB created the accounting standards known as Generally Accepted Accounting Principles (GAAP), which are used in the United States.
B. The FASB created the accounting standards known as Generally Accepted Accounting Principles (GAAP), which are used internationally.
C. The FASB works closely with the Securities and Exchange Commission (SEC) to develop new accounting standards.
D. Both A & C
E. Both B & C
2. Which of the following is least likely to appear first on the balance sheet
A. Intangible Assets
B. Property, Plant, and Equipment,
C. Accounts Payable
D. Interest Expense
E. Accounts Receivable
3. On December 31, 2023, Foot Locker purchases a line of Nike shoes (to be resold) from a vendor for $70,000 with a promise to pay later. Which of the following best represents the change in the accounting equation for Foot Locker as of December 31, 2023?
A. Total assets increase, total liabilities increase, and total owner’s equity increases.
B. Total assets increase, total liabilities increase, and total owner’s equity has no change.
C. Total assets increase, total liabilities have no change, and total owner’s equity increases.
D. Total assets increase, total liabilities have no change, and total owner’s equity decreases.
E. There is no change to the accounting equation.
4. Which of the following is not a primary purpose of the Statement of Cash Flows?
A. Allowing external users of the financial statements to assess the company’s ability to generate positive future cash flows.
B. Allowing external users of the financial statements to assess the differences in the company’s net income and net cash flow from operating activities.
C. Allowing external users of the financial statements to assess the company’s change in cash and cash equivalents between the beginning and end of the accounting period.
D. Neither A nor B are primary purposes.
E. All of the Above are primary purposes of the course.
5. Company XYZ has the following financial information for fiscal year 2023: Net Income: $280,000; Interest Expense: $50,000; Income Tax Expense: $120,000. Which of the following best represents the interest coverage ratio for Company XYZ?
A. 0.75
B. 1.25
C. 2.33
D. 3.75
E. 9.00
6. Which of the following best describes the relationship between the statement of cash flows and the income statement?
A. The income statement aggregates activities of the company over the accounting period, while the statement of cash flows focuses on cash activities as of one point in time.
B. The statement of cash flows aggregates activities of the company over the accounting period, while the income statement focuses on activities as of one point in time.
C. Both the statement of cash flows and the income statement aggregate activities of the company over the accounting period, but the statement of cash flows focuses on accounting profits while the income statement focuses on the changes in cash.
D. Both the statement of cash flows and the income statement aggregate activities of the company over the accounting period, but the income statement focuses on accounting profits while the statement of cash flows focuses on the changes in cash.
E. Both the statement of cash flows and the income statement focus on activities as of one point in time.
7. Which of the following does not represent a cash flow from financing activities for the KLD Company?
A. KLD Company rents a warehouse for $500,000.
B. TD Bank provides a loan of $1 Million to KLD Company
C. A shark invests $100,000 into KLD Company in exchange for 30% equity.
D. KLD Company pays a $0.25 dividend per share.
E. Both A and C
8. Net loss will result if gross profit does not exceed:
A. Purchases.
B. Cost of goods sold.
C. Revenues.
D. Cost of goods sold plus operating expenses.
E. Operating expenses.
9. Which of the following best represents the formula for the current ratio?
A. Current Liabilities / Current Assets
B. Current Assets / Total Liabilities
C. Current Assets / Current Liabilities
D. Quick Assets / Total Liabilities
E. Quick Assets / Current Assets
10. The amount by which revenues exceed gross profit
A. Net Income
B. COGS
C. Operating Income
D. Net Loss
E. Owner’s Equity
11. Which of the following is not included in the reconciliation of net income with net cash flows using the indirect method?
A. Adjustments for Noncash expenses
B. Adjustments for Nonoperating Gains and Losses
C. Adjustments for Timing Differences
D. All of the Above are included
E. None of the Above are included
12. Match each of the following to the financial statement classes outlined below. (Note answers may be used more than once):
1. Prepaid Insurance _____
2. Property, Plant, and Equipment _____
3. Unearned Revenue _____
4. Dividends _____
A. Assets
B. Liabilities
C. Equity
D. Revenues
E. Expenses
PART B
Prompts 2.1, 2.2, and 2.3 utilize the following information:
September 30, 2023: Apple, Inc. prepays a 2-year rental lease for $1.2 Million.
December 31, 2023: Apple, Inc. pays $70,000 Cash to a bank as interest for a short-term note issued on June 30, 2023.
Prompt #2.1 Provide the Journal Entry to record the September 30, 2023 transaction from the company’s perspective.
Prompt #2.2 Prepare the necessary T-Accounts for the December 31, 2023 transaction from the company’s perspective:
Prompt #2.3 If these were the only two transactions for Apple, Inc. during 2023, what would the Net Income or Net Loss be for the company?