AFA100 Final Exam Practice Questions

Tangible Asset

Assets like buildings, furniture, and vehicles that have a physical form.

Intangible Asset

Assets like copyrights, franchises, and trademarks that lack physical substance.

Gain or Loss on Disposal

The difference between the selling price and the book value of an asset upon disposal.

Acquisition Cost

The total cost incurred to acquire an asset, including invoice price, transportation, installation, and other related costs.

Share Repurchase Impact

The effects on equity and common shares outstanding when a company repurchases its shares.

Recording Transactions

The proper accounting entries when exchanging common shares for services rendered.

Stock Dividend Components

Components involved in the accounting entry for a stock dividend declaration.

Inventory Costing

The impact of cost formulas like FIFO and weighted-average on net earnings during decreasing unit costs.

Gain on Sale

The treatment of gains on the statement of cash flows under the indirect method.

Allowance Method

Procedures and effects of the allowance method for uncollectible accounts.

Stock Dividend Effects

The impact of a stock dividend on shareholders' equity and common shares.

Bad Debt Adjustment

Adjusting entries required to record bad debts based on aging of accounts receivable.

Allowance Balance

Determining the ending balance in the allowance for doubtful accounts based on transactions.

Depreciation Expense

Calculating depreciation expense using the double declining-balance method.

Bond Retirement Entry

The accounting entries involved in retiring a bond at a premium.

Bond Interest Payment

Journal entry to record the first interest payment on bonds issued at a discount.

Bank Reconciliation

Determining the cash balance per books before starting the bank reconciliation process.

Inventory Overstatement

Effects of an overstatement of ending inventory under the periodic inventory system and FIFO method.

Stock Split Impact

Effects of a 2 for 1 stock split on retained earnings, shares, and equity.

Investing Activities

Activities involving the acquisition and disposal of long-term assets like property, plant, and equipment.

Inventory Valuation

Calculating the value of inventory at the end of a period considering purchases, returns, and sales.

Retained Earnings Balance

Determining the ending balance in the retained earnings account based on revenues, expenses, and dividends.

Accrual Method

Recognizing expenses when they are incurred to generate revenues under the accrual accounting method.

Statement of Earnings

The financial statement where the company's revenues, expenses, and net income are reported.

Statement of Cash Flows

The financial statement that shows the inflows and outflows of cash during a specific period.

Comparability

Ensuring that financial information can be compared with similar information from other periods or other companies.

Faithful Representation

Financial information that is complete, neutral, and free from error, providing a true and fair view.

Provide information that is useful to individuals making investment and credit decisions

The main objective of financial reporting.

Depreciation Expense

The amount allocated for the decrease in value of assets over time.

Impairment Loss

The reduction in the value of an asset due to it being unable to recover its carrying amount.

Gain on Disposal

The profit realized from selling an asset for more than its carrying amount.

Statement of Cash Flows

A financial statement showing the inflows and outflows of cash during a specific period.

Operating Activities

Activities related to the primary business operations of a company.

Investing Activities

Activities involving the purchase and sale of long-term assets.

Financing Activities

Activities related to raising capital and repaying investors.

Net Increase in Cash

The overall change in cash from the beginning to the end of a period.

Long-term Investments

Assets held for an extended period, typically not for trading purposes.

Retained Earnings

The portion of net earnings not distributed as dividends but retained by the company.