🎯Preparing Financial Statements Quiz 3: 16 MCQs

Responses

1. 

   Deleted User 16 February 2024

   Hello Mohit,

   In order for us to better assist you, please can you mention which course are you enrolled to ?

   Farhat Lectures Support Team

   1. 

      Deleted User 17 February 2024

      Financial Or Principles Of Accounting
      I am referring to FA Chapter 2 Quiz 3

      1. 

         Deleted User 18 February 2024

         Hello Mohit,

         You can refer to the lecture “Analyzing Business Transaction” which captures a large portion of the topic covered under this quiz.

         Farhat Lectures Support Team

2. 

   Sonali 15 March 2024

   The question is ‘The total cash payments during May were:’
   So, why are we adding opening cash balance? If the question was cash balance then i understand that 1200 needs to be added. So, should it not be 6000-2300?

   1. 

      Deleted User 18 March 2024

      Hello Sonali,

      In order to calculate the total cash payments during May, we need to consider the entire cash flow for the month. We start with the opening cash balance on May 1st because it represents the amount of cash available at the beginning of the month. Then, we add the cash collected from sales during May to account for the total cash inflow. Finally, we subtract the ending cash balance on May 31st to find out how much cash was disbursed or paid out during the month. So, in this case, we’re adding the opening cash balance of $1,200 to the cash collected from sales and then subtracting the ending cash balance of $2,300 to determine the total cash payments during May.”

      Farhat Lectures Support Team

3. 

   Sonali 15 March 2024

   1st question and 8th question are the same

   1. 

      Deleted User 18 March 2024

      Hello Sonali,

      Thank you for raising the above. We have replace the 8th question, please recheck the testbank.

      Farhat Lectures Support Team

4. 

   Ethan Thiakos 17 April 2024

   Hey Mohit,

   DEA stands for “distributions, expenses, and Assets”. These all increase with a Debit. Any other account increases with a credit. Hopefully this helps when answering the questions.

   “Debit” and “Credit” have no real definition outside of “left” and “right” respectively.

5. 

   Adjie Akmal 5 May 2024

   This quiz covers topics in chapter 2 and the topic Preparing Financial statements in chapter 1. But the quiz can be found in chapter 1, is that intentional or should it belong to chapter 2?

6. 

   Flaydiana Pierre 29 May 2024

   I would like more quizzes. I think they are great

7. 

   Jun Arcayena 31 July 2024

   Hello,

   For question 1, I understand why an increase to common stock of $150,000 is included, but I am confused as to why an increase to both building and cash are not included in the journal entry to Spears. I was thinking the journal entry would look something like this:

   Building 120,000
   Cash 30,000
   Common Stock 150,000

   Based off this journal entry, I thought the cash and building accounts increased. Is this journal entry incorrect?

   The feedback states that those accounts increase by $120,000 and $30,000 respectively, but those answer choices are both incorrect. Wouldn’t this journal entry show that the building account, cash account and common stock account all increased for Spears?

   Thanks for your help,
   Jun

8. 

   Jun Arcayena 31 July 2024

   As a follow up to my previous comment: I noticed the journal entry didn’t format correctly. It should show an indent to Common Stock as a credit balance. I tried to post a reply to it but I’m not able to until it has been moderated.

   Thanks again!

   1. 

      Maroun, CPA 3 August 2024

      Hello Jun,

      Your understanding and the journal entry are correct!
      There was a typo in the answer choices. I updated them.
      As mentioned in the explanation and your comment, the building account, cash account, and common stock account all increased for Spears.

      Thank you for bringing this to our attention and sorry for the inconvenience!

9. 

   Austin Dusenbery 18 December 2024

   In question 13, why wouldn’t activity 4 be recognized as a current liability against the ending stockholder’s equity? I see it included in the explanation but not in the equation for how the solution was reached.

   1. 

      Maroun, CPA 20 December 2024

      Hi Austin,

      It seems there might have been a mix-up in the question number. Please double-check the question you’re referring to, as question 13 asks to compute net income, and contain no activities.
      Please let us know the correct question number and we’d be more than happy to assist you!

      1. 

         Austin Dusenbery 20 December 2024

         Apologies, this question was in regards to Question 12 rather than 13.

         1. 

            Maroun, CPA 21 December 2024

            Hi Austin,

            Activity 4 (the $12,300 collected in advance) does not immediately impact equity because it is recorded as a liability (Unearned Revenue). Liabilities are separate from equity. The balance sheet components are as follows:
            – Assets: What the company owns (e.g., cash, furniture, equipment, receivables).
            – Liabilities: What the company owes (e.g., unearned revenue, loans, payables).
            – Stockholder’s Equity: The owner’s interest in the business (e.g., owners’ contributions, retained earnings).

            The accounting formula is:
            Assets = Liabilities + Equity

            Equity is affected when the services are actually provided (Activity 8), at which point the liability becomes revenue and flows into net income and retained earnings, ultimately impacting stockholder’s equity through the increase in retained earnings.
            To get a deeper understanding of stockholder’s equity components, I recommend watching this lecture:
            https://farhatlectures.com/courses/financial-accounting-course/lessons/chapter-1-accounting-in-business/topic/accounting-equation-equity-component/

            After watching the lecture, let me know if you have any questions.

10. 

    Ghadeer Eldeeb 8 October 2025

    Great Quiz

    1. 

       Maroun, CPA 9 October 2025

       Hello Ghadeer,

       Thank you! Glad you enjoyed it.