CLEP Financial Accounting with Online Practice Tests

by Balla, Donald

Edition:

2nd

ISBN13:

9780738610290

ISBN10:

0738610291

Format:

Paperback

Pub. Date:

2/15/2012

Publisher(s):

Research & Education Assn

Other versions by this Author

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Summary

REA's CLEP Financial AccountingTest Prep with Online Practice Exams - Earns You College Credits! If you're looking for an easy and inexpensive way to earn college credit, why not take the CLEP Financial Accounting exam? CLEP Financial Accountingtest prep with online practice is the latest addition to REA's CLEP library. Our CLEP test preps are perfect for adults returning to college (or attending for the first time), military service members, high-school graduates looking to earn college credit, or home-schooled students with knowledge that can translate into college credit. REA's comprehensive review covers all the topics on the official CLEP Financial Accounting exam: accounting reports, debits and credits, journals and ledgers, accounts receivable, and more. Start your study by taking our diagnostic practice test online. This timed test includes automatic scoring and feedback, so you can pinpoint your strengths and weaknesses. The book includes two full-length practice tests that mirror the actual exam, allowing you to become familiar with the test format before taking the CLEP. Each practice test comes with detailed explanations of answers to help you identify areas in need of improvement and be prepared on test day. Both of the book's practice tests are also available online in a timed format with instant scoring, diagnostic feedback, and detailed explanations of answers. A study schedule and test-taking strategies round out this complete test prep package. What is CLEP? CLEP is the College Board's credit-by-examination program for 33 subjects. Each exam passed earns the student between 3-12 credits at more than 2,900 colleges and universities in the U.S. and abroad. REA is the acknowledged leader in CLEP preparation, with the most extensive library of CLEP titles and software available. REA's CLEP test preps will help you earn valuable college credits, save on tuition, and get a college degree.

About Our Author	p. ix
About Research & Education Association	p. ix
Acknowledgments	p. x
Preface	p. xi
Passing the CLEP Financial Accounting Exam	p. 1
Getting Started	p. 3
The REA Study Center	p. 4
An Overview of the Exam	p. 5
All About the CLEP Program	p. 5
Options for Military Personnel and Veterans	p. 7
SSD Accommodations for Candidates with Disabilities	p. 7
6-Week Study Plan	p. 8
Test-taking Tips	p. 9
The Day of the Exam	p. 10
Online Diagnostic Test.. www.rea.com/studycenter
Getting Started	p. 11
Balloon Party, Lauren's New Business	p. 13
Lauren's First Accounting	p. 14
The Balance Sheet Introduced	p. 16
Analyzing the Balance Sheet	p. 19
Operating Cycle and Fiscal Year	p. 20
Making Money	p. 25
Operating the Business	p. 27
Making Adjustments	p. 29
The Income Statement Refined	p. 31
The Statement of Owner's Equity	p. 34
Keeping Track of Numbers in Accounts	p. 35
Using T-Accounts	p. 37
How Operations Affect the Balance Sheet	p. 38
Watching Over Cash	p. 45
Lauren Decides She Needs to Watch Over Cash	p. 47
Cash from Operations	p. 49
Cash from Investing Activities	p. 50
Cash from Financing Activities	p. 51
The Direct Method of Presenting the Cash Flow Statement	p. 52
Accounting Reports and the Outside World	p. 57
Other Users of Lauren's Financial Statements	p. 59
Making Sure the Statements Are Accurate	p. 60
Debits and Credits	p. 67
Introducing Debits and Credits	p. 69
Posting the Start-Up Transactions in the T-Accounts	p. 70
T-Accounts for Income and Expenses	p. 72
Posting Operations to T-Accounts	p. 73
Closing Temporary Accounts	p. 76
Correcting Errors	p. 78
Normal Balances of Accounts	p. 78
Journals and Ledgers	p. 83
The General Journal	p. 85
The General Ledger	p. 88
Specialized Journals	p. 90
How to Write Vertical Journal Entries	p. 90
Controls and Ethics	p. 97
Why Balloon Party Should Have Internal Controls	p. 99
Lauren Designs Balloon Party's Internal Controls	p. 100
Ethics	p. 102
All Internal Controls Are Imperfect	p. 103
This Chapter Has Not Told Everything	p. 104
Cash and Short-Term Investments	p. 107
Reconciling the Bank Statement	p. 109
Setting Up a Petty Cash System	p. 114
Investing in Short-Term Securities	p. 116
Accounts Receivable	p. 123
Accrual Accounting for Accounts Receivable	p. 125
Cash Basis Accounting for Sales on Account	p. 131
The Direct Write-Off Method for Bad Debts	p. 132
Other Receivables	p. 139
Discounting a Note Receivable at the Bank	p. 141
Accruing Interest Receivable	p. 145
A Customer Dishonors a Note	p. 145
Loans Receivable	p. 146
Analysis of Current Assets	p. 146
Merchandise Inventories	p. 153
Two Methods for Handling Inventory	p. 155
The Perpetual Inventory Method	p. 156
Following the Trail of Debits	p. 161
The Periodic Inventory Method	p. 161
Comparing the Four Inventory Systems and Two Methods	p. 164
Analyzing How Well a Business Handles Inventory	p. 167
Supplies and Prepaids	p. 175
Accounting for Prepaid Assets	p. 177
Two Methods to Account for Operating Supplies	p. 179
Buying and Selling Plant Assets	p. 185
Balloon Party Buys a Group of Machines	p. 187
Repairs or Improvements	p. 189
Disposing of Fixed Assets	p. 189
Vertical Journal Entries for Fixed Assets	p. 190
The Cash Flow Statement and Fixed Assets	p. 19
Depreciation	p. 199
Depreciation: Allocating the Cost of Plant Assets	p. 201
The Depreciation Expense Formula	p. 202
Depreciation Conventions	p. 208
The Depreciation Schedule	p. 209
Changing Accounting Estimates	p. 212
Land, Natural Resources, and Intangible Assets	p. 217
Land or Land Improvement?	p. 219
Assets You Cannot Grab Hold Of	p. 220
Natural Resources	p. 222
Vertical Journal Entries for Intangible Assets	p. 223
Current Liabilities	p. 229
What Does It Mean to "Accrue" a Liability?	p. 231
Adjusting Entries at the End of the Period	p. 235
Make Sure Wages Get Counted at the End of the Period	p. 236
Estimating Warranty Expense	p. 237
Loan Amortization Schedules	p. 238
Accruing Interest Expense	p. 241
Reversing EntriesùMaking Adjusting Entries Easier	p. 242
Long-Term Liabilities	p. 247
What Are Bonds?	p. 249
Recording the Money Received When Issuing Bonds	p. 250
Making the Periodic Cash Payments for Bonds	p. 255
Deferring the Recognition of Revenues	p. 258
The Equity Section	p. 265
The Sole Proprietorship Becomes a Partnership	p. 267
What Is a Corporation?	p. 271
Balloon Party Partnership Incorporates	p. 275
Paying a Dividend	p. 276
Treasury Stock	p. 278
Closing Entries for a Corporation	p. 279
The Final Word on Financial Statements	p. 285
The Complete Income Statement	p. 287
The Complete Statement of Stockholders' Equity	p. 295
The Comprehensive Balance Sheet	p. 297
The Complete Cash Flow Statement	p. 300
Financial Analysis Methods	p. 302
Practice Test 1 (also available online at www.rea.com/studycenter)	p. 311
Answer Key	p. 337
Detailed Explanations of Answers	p. 338
Practice Test 2 (also available online at www.rea.com/studycenfer)	p. 351
Answer Key	p. 379
Detailed Explanations of Answers	p. 380
Anser Sheets	p. 393
Index	p. 397
Table of Contents provided by Ingram. All Rights Reserved.

Excerpts

PASSING THE CLEP FINANCIAL ACCOUNTING EXAM

Congratulations! You're joining the millions of people who have discovered the value and educational advantage offered by the College Board's College-Level Examination Program, or CLEP. This test prep covers everything you need to know about the CLEP Financial Accounting exam, and will help you earn the college credit you deserve while reducing your tuition costs.GETTING STARTED
There are many different ways to prepare for a CLEP exam. What's best for you depends on how much time you have to study and how comfortable you are with the subject matter. To score your highest, you need a system that can be customized to fit you: your schedule, your learning style, and your current level of knowledge. This book, and the online tools that come with it, allow you to create a personalized study plan through three simple steps: assessment of your knowledge, targeted review of exam content, and reinforcement in the areas where you need the most help. Let’s get started and see how this system works.Test Yourself& GetFeedback
Score reports from your online diagnostic and practice tests give you a fast way to pinpoint what you already know and where you need to spend more time studying.Review with the Book
Study the topics tested on the CLEP exam. Targeted review chapters cover everything you need to know.Improve Your Score
Armed with your score reports, you can personalize your study plan. Review the parts of the book where you’re weakest and study the answer explanations for the test questions you answered incorrectly.THE REA STUDY CENTER
The best way to personalize your study plan and focus on your weaknesses is to get feedback on what you know and what you don’t know. At the online REA Study Center, you can access two types of assessment: a diagnostic exam and full-length practice exams. Each of these tools provides true-to-format questions and delivers a detailed score report that follows the topics set by the College Board.Diagnostic Exam
Before you begin your review with the book, take the online diagnostic exam. Use your score report to help evaluate your overall understanding of the subject, so you can focus your study on the topics where you need the most review.Full-Length Practice Exams
These practice tests give you the most complete picture of your strengths and weaknesses. After you've finished reviewing with the book, test what you've learned by taking the first of the two online practice exams. Review your score report, then go back and study any topics you missed. Take the final practice test to ensure you have mastered the material and are ready for test day.If you're studying and don't have Internet access, you can take the printed tests in the book. These are the same practice tests offered at the REA Study Center, but without the added benefits of timed testing conditions and diagnostic score reports. Because the actual exam is computer-based, we recommend you take at least one practice test online to simulate test-day conditions.AN OVERVIEW OF THE EXAM
The CLEP Financial Accounting exam covers the material one would find in a college-level Financial Accounting class. The exam assesses the student's knowledge and mastery of the skills and concepts found in an entry-level financial accounting course, including familiarity with accounting concepts and terminology, understanding and analyzing accounting data, and applying accounting techniques to problem-solving situations.The exam consists of 75 multiple-choice questions, each with five possible answer choices, to be answered in 90 minutes. The approximate breakdown of topics is as follows:20–30% General Topics20–30% The Income Statement30–40% The Balance Sheet5–10% Statement of Cash Flows< 5% Miscellaneous
ALL ABOUT THE CLEP EXAMS

What is the CLEP?
CLEP is the most widely accepted credit-by-examination program in North America. CLEP exams are now available in 33 subjects and test the material commonly required in an introductory-level college course. Examinees can earn from three to twelve credits at more than 2,900 colleges and universities in the U.S. and Canada. For a complete list of the CLEP subject examinations offered, visit the College Board website:www.collegeboard.org/clep.Who takes CLEP exams?
CLEP exams are typically taken by people who have acquired knowledge outside the classroom and who wish to bypass certain college courses and earn college credit. The CLEP program is designed to reward examinees for learning—no matter where or how that knowledge was acquired.Although most CLEP examinees are adults returning to college, many graduating high school seniors, enrolled college students, military personnel, veterans, and international students take CLEP exams to earn college credit or to demonstrate their ability to perform at the college level. There are no prerequisites, such as age or educational status, for taking CLEP examinations. However, because policies on granting credits vary among colleges, you should contact the particular institution from which you wish to receive CLEP credit.Who administers the exam?
CLEP exams are developed by the College Board, administered by Educational Testing Service (ETS), and involve the assistance of educators from throughout the United States. The test development process is designed and implemented to ensure that the content and difficulty level of the test are appropriate.When and where is the exam given?
CLEP exams are administered year-round at more than 1,200 test centers in the United States and can be arranged for candidates abroad on request. To find the test center nearest you and to register for the exam, contact the CLEP Program:CLEP Services
P.O. Box 6600
Princeton, NJ 08541-6600
Phone: (800) 257-9558 (8 a.m. to 6 p.m. ET)
Fax: (609) 771-7088
Website:www.collegeboard.org/clep

OPTIONS FOR MILITARY PERSONNEL AND VETERANS
CLEP exams are available free of charge to eligible military personnel and eligible civilian employees. All the CLEP exams are available at test centers on college campuses and military bases. Contact your Educational Services Officer or Navy College Education Specialist for more information. Visit the DANTES or College Board websites for details about CLEP opportunities for military personnel.Eligible U.S. veterans can claim reimbursement for CLEP exams and administration fees pursuant to provisions of the Veterans Benefits Improvement Act of 2004. For details on eligibility and submitting a claim for reimbursement, visit the U.S. Department of Veterans Affairs website atwww.gibill.va.gov/pamphlets/testing.htm.

CLEP can be used in conjunction with the Post-9/11 GI Bill, which applies to veterans returning from the Iraq and Afghanistan theaters of operation. Because the GI Bill provides tuition for up to 36 months, earning college credits with CLEP exams expedites academic progress and degree completion within the funded timeframe.SSD ACCOMMODATIONS FOR CANDIDATES WITH DISABILITIES
Many test candidates qualify for extra time to take the CLEP exams, but you must make these arrangements in advance. For information, contact:College Board Services for Students with Disabilities
P.O. Box 6226
Princeton, NJ 08541-6226
Phone: (609) 771-7137 (Monday through Friday, 8 a.m. to 6 p.m. ET)
TTY: (609) 882-4118
Fax: (609) 771-7944
E-mail:ssd@info.collegeboard.org
TEST-TAKING TIPS

Know the format of the test.CLEP computer-based tests are fixed-length tests. This makes them similar to the paper-and-pencil type of exam because you have the flexibility to go back and review your work in each section.Learn the test structure, the time allotted for each section of the test, and the directions for each section.By learning this, you will know what is expected of you on test day, and you'll relieve your test anxiety.Read all the questions—completely. Make sure you understand each question before looking for the right answer. Reread the question if it doesn't make sense.Annotate the questions.Highlighting the key words in the questions will help you find the right answer choice.Read all of the answers to a question.Just because you think you found the correct response right away, do not assume that it's the best answer. The last answer choice might be the correct answer.Work quickly and steadily.You will have 90 minutes to answer 75 questions, so work quickly and steadily. Taking the timed practice tests online will help you learn how to budget your time.Use the process of elimination. Stumped by a question? Don't make a random guess. Eliminate as many of the answer choices as possible. By eliminating just two answer choices, you give yourself a better chance of getting the item correct, since there will only be three choices left from which to make your guess. Remember, your score is based only on the number of questions you answer correctly.Don’t waste time!Don't spend too much time on any one question. Remember, your time is limited and pacing yourself is very important. Work on the easier questions first. Skip the difficult questions and go back to them if you have the time.Look for clues to answers in other questions.If you skip a question you don't know the answer to, you might find a clue to the answer elsewhere on the test.Acquaint yourself with the computer screen.Familiarize yourself with the CLEP computer screen beforehand by logging on to the College Board website. Waiting until test day to see what it looks like in the pretest tutorial risks injecting needless anxiety into your testing experience. Also, familiarizing yourself with the directions and format of the exam will save you valuable time on the day of the actual test.Be sure that your answer registers before you go to the next item.Look at the screen to see that your mouse-click causes the pointer to darken the proper oval. If your answer doesn't register, you won't get credit for that question.THE DAY OF THE EXAM
On test day, you should wake up early (after a good night's rest, of course) and have breakfast. Dress comfortably, so you are not distracted by being too hot or too cold while taking the test. (Note that "hoodies" are not allowed.)

Arrive at the test center early. This will allow you to collect your thoughts and relax before the test, and it will also spare you the anxiety that comes with being late. As an added incentive, keep in mind that no one will be allowed into the test session after the test has begun.Before you leave for the test center, make sure you have your admission form and another form of identification, which must contain a recent photograph, your name, and signature (i.e., driver's license, student identification card, or current alien registration card). You will not be admitted to the test center if you do not have proper identification.You may wear a watch to the test center. However, you may not wear one that makes noise, because it may disturb the other test-takers. No cell phones, dictionaries, textbooks, notebooks, briefcases, or packages will be permitted, and drinking, smoking, and eating are prohibited.Good luck on the CLEP Financial Accounting exam!