Accounting for Business Majors Exam Bank
Course Introduction
Accounting for Business Majors introduces students to the fundamental principles and practices of financial and managerial accounting essential for effective decision-making in a business environment. The course covers topics such as the accounting cycle, preparation and analysis of financial statements, the role of accounting information in planning and control, and the impact of financial data on organizational strategy. Emphasis is placed on real-world applications and ethical considerations, equipping students with the skills needed to interpret accounting information and communicate results to various stakeholders in a business context.
Recommended Textbook
Financial Accounting 15th Edition by Jan Williams
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Page 2
Chapter 1: Accounting: Information for Decision Making
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Sample Questions
Q1) Objectives of financial reporting
List and briefly describe the objectives of financial reporting beginning with the most general and ending with the most specific.
Answer: (1.) Provide information useful in making investment and credit decisions. (2.) Provide information useful in assessing the amount, timing, and uncertainty of future cash flows.
(3.) Provide information about economic resources, claims to economic resources, and changes in resources and claims.
Q2) Return on investment is the same as return of investment.
A)True
B)False
Answer: False
Q3) Investors and creditors are interested in a company's "cash flow prospects" What two specific concerns of investors and creditors are summarized by the term "cash flow prospects?"
Answer: Return of investment and return on investment.
Q4) The information is intended to be used for planning and control decisions.
Answer: Management
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3
Chapter 2: Basic Financial Statements
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Sample Questions
Q1) A strong statement of cash flows indicates that significant cash is being generated by:
A) Operating activities.
B) Financing activities.
C) Investing activities.
D) Effective tax planning.
Answer: A
Q2) A revenue transaction results in all of the following except:
A) An increase in assets.
B) An increase in owners' equity.
C) A positive cash flow in either the past, present, or future.
D) An increase in liabilities.
Answer: D
Q3) A cash flows statement reports revenue and expense activities for a specific time period such as one month or one year.
A)True
B)False
Answer: False
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Chapter 3: The Accounting Cycle: Capturing Economic Events
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Sample Questions
Q1) The journal entry to record a particular business transaction includes a credit to a liability account. This transaction is most likely also to include:
A) Issuance of new capital stock.
B) The purchase of an asset on account.
C) A cash payment.
D) A credit to Accounts Receivable.
Answer: B
Q2) In a ledger, debit entries cause:
A) Increases in owners' equity, decreases in liabilities, and increases in assets.
B) Decreases in liabilities, increases in assets, and decreases in owners' equity.
C) Decreases in assets, decreases in liabilities, and increases in owners' equity.
D) Decreases in assets, increases in liabilities, and increases in owners' equity.
Answer: B
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5
Chapter 4: The Accounting Cycle: Accruals and Deferrals
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Sample Questions
Q1) Great Kids Co. began providing day care for the children of employees of a large corporation on January 15 for an agreed monthly fee of $9,000. The first payment is to be received on February 15. The adjusting entry required by Great Kids Co. on January 31 includes:
A) A credit to Child Care Fees Earned of $4,500.
B) A debit to Child Care Fees Receivable of $9,000.
C) A debit to Unearned Child Care Revenue of $4,500.
D) A debit to Fees Receivable of $9,000.
Q2) When a company receives cash in advance and it is obligated to provide a service or a product in the future, the entry would be a credit to a liability account and a debit to revenue.
A)True
B)False
Q3) Which of the following activities is least likely to be limited to "year-end"?
A) Closing the accounts.
B) Drafting notes to accompany statements.
C) Recording routine transactions.
D) Undergoing an audit.
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Chapter 5: The Accounting Cycle: Reporting Financial
Results
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Sample Questions
Q1) The dividends account should be:
A) Closed to income summary.
B) Closed to retained earnings.
C) Closed only if there is a profit.
D) Not closed at all.
Q2) Refer to the information above. The total debits in the After-Closing Trial Balance will equal:
A) $23,500.
B) $31,000.
C) $50,750.
D) $58,250.
Q3) The return on equity ratio equals net income divided by common stock.
A)True
B)False
Q4) In regard to disclosures that are required to be contained in annual reports, the FASB has no well-defined list of items that must be included.
A)True
B)False
Page 7
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Chapter 6: Merchandising Activities
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Sample Questions
Q1) Fashion House uses a perpetual inventory system. At the beginning of the year, inventory amounted to $50,000. During the year, the company purchased merchandise for $230,000, and sold merchandise costing $245,000. A physical inventory taken at year-end indicated shrinkage losses of $4,000. Prior to recording these shrinkage losses, the year-end balance in the company's Inventory account was:
A) $31,000.
B) $35,000.
C) $50,000.
D) Some other amount.
Q2) Pet Foods Plus purchased bagged dog food at an invoice price of $6,000 and terms of 2/10, n/30. Half of the bags had been damaged in shipment and delivery was refused. If Pet Foods Plus pays the remaining amount of the invoice within the discount period, the amount paid should be:
A) $2,940.
B) $3,000.
C) $5,880.
D) $6,000.
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Chapter 7: Financial Assets
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Sample Questions
Q1) Marketable securities includes investments in bonds and in the capital stocks of publicly traded corporations.
A)True
B)False
Q2) Assuming a single journal entry is made to adjust Quinn Company's accounting records at January 31, the journal entry includes:
A) A debit to Rent Expense for $90.
B) A credit to Accounts Receivable, G.Denton, for $426.
C) A credit to Cash for $450.
D) A credit to Cash for $1,720.
Q3) What is the adjusted cash balance in the September 30 bank reconciliation?
A) $16,237.
B) $12,580.
C) $9,513.
D) $5,856.
Q4) What is the "adjusted cash balance" at June 30?
A) $3,900.
B) $3,093.
C) $7,600.
D) Some other amount.
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Chapter 8: Inventories and the Cost of Goods Sold
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Sample Questions
Q1) In a manufacturing company, the "just-in-time" concept of inventory management is best illustrated by:
A) Receiving deliveries of materials from suppliers just before the materials are used in the production process.
B) Completing the manufacturing process just before the deadline established by the customer.
C) An automated factory that reduces production time below that of other companies in the industry.
D) Selling finished products before they go out of style.
Q2) Compute the cost of the ending inventory based on the FIFO method of inventory valuation.
A) $12,500.
B) $29,175.
C) $10,975.
D) $27,650.
Q3) During periods of inflation, the LIFO cost flow assumption will yield a lower inventory value than FIFO.
A)True
B)False
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Page 10
Chapter 9: Plant and Intangible Assets
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Q1) Refer to the information above. Assume that in its financial statements, Tilton Products uses the 200%-declining-balance method and the half-year convention. Depreciation expense in 2009 and 2010 will be:
A) $11,000 in 2009 and $19,250 in 2010.
B) $22,000 in 2009 and $12,571 in 2010.
C) $22,000 in 2009 and $7,857 in 2010.
D) $11,000 in 2009 and $22,000 in 2010.
Q2) Refer to the information above. Assume that in its financial statements, Victor uses straight-line depreciation and rounds depreciation for fractional years to the nearest whole month. Depreciation recognized on this equipment in 2009 and 2010 will be:
A) $23,333 in 2009 and $35,000 in 2010.
B) $40,000 in 2009 and $30,000 in 2010.
C) $20,000 in 2009 and $35,000 in 2010.
D) $26,250 in 2009 and $35,000 in 2010.
Q3) In accounting, depreciation refers to a decline in the asset's current market value, not the allocation of the cost of an asset to expense.
A)True
B)False
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11
Chapter 10: Liabilities
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Sample Questions
Q1) Interest expense on this bond issue reported in Cricket's Year 1, income statement is:
A) $2,400,000.
B) $4,800,000.
C) $5,400,000.
D) $7,200,000.
Q2) What is the amount of interest expense Central Food's recognizes on this note in 2011?
A) $700.
B) $8,400.
C) $7,700.
D) $1,400.
Q3) The amount of the present value of a future cash receipt will depend upon:
A) The length of time until the money is received.
B) The amount of money to be received.
C) The required rate of return.
D) The amount of money to be received, the length of time until the money is received, and the required rate of return.
Q4) How much of the first payment made on December 31, 2009, is allocated to repayment of principal? $________
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Chapter 11: Stockholders Equity: Paid-In Capital
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Q1) The sale of treasury stock at a price in excess of its cost results in a realized gain which should be presented as a non-operating item in the income statement.
A)True
B)False
Q2) If a corporation has issued a single class of stock, it must be:
A) Common Stock.
B) Preferred Stock.
C) Stock issued at Par-value.
D) Cumulative preferred Stock.
Q3) Only preferred stock of a corporation must have a par value. A)True
B)False
Q4) The par value of a stock is the minimum amount of capital of the corporation existing for the protection of creditors.
A)True B)False
Q5) A corporation must always have more than one class of stock. A)True B)False
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Chapter 12: Income and Changes in Retained Earnings
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Sample Questions
Q1) General Corporation was organized on January 1 and issued 500,000 shares of common stock on that date. On July 1, an additional 200,000 shares were issued for cash. Net income for the year was $5,184,000. Net earnings per share amounted to:
A) $7.41.
B) $7.98.
C) $8.41.
D) $8.64.
Q2) Execucomp Corporation's financial statements in the current year show a loss from discontinued operations, a prior period adjustment, and an extraordinary gain. If Execucomp's income statement is prepared according to generally accepted accounting principles (as illustrated in your text), which of the following four items would appear second in sequence in the income statement?
A) Prior period adjustment.
B) Income from continuing operations.
C) Loss from discontinued operations.
D) Extraordinary gain.
Q3) Stock splits are always in a 2 for 1 ratio.
A)True
B)False
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Page 14
Chapter 13: Statement of Cash Flows
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Q1) Under the indirect method, depreciation, increase in inventories, and "non-operating" losses are added to net income to arrive at net cash flow from operating activities.
A)True
B)False
Q2) Compute the amount of Seldin's cash payments for purchases of merchandise during the current year.
A) $130,000.
B) $125,000.
C) $133,000.
D) $127,000.
Q3) When equipment is sold at a loss:
A) The net proceeds are shown in the investing section.
B) The book value of the asset is shown in the investing section.
C) The book value of the asset is shown in the investing section, and the loss is shown in the operating section.
D) The net proceeds are shown in the financing section.
Q4) Interest paid belongs in the operating section of the statement of cash flows.
A)True B)False
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Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Comparative financial statements compare the company's current statements with:
A) Those of prior periods.
B) Those of other companies in the same industry.
C) Those of the company's principal competitor.
D) The budgeted level of performance for the period.
Q2) What is the current ratio?
A) 5.0 to 1.
B) 1.5 to 1.
C) .7 to 1.
D) .8 to 1.
Q3) Noble's operating income was:
A) $1,610.
B) $675.
C) $935.
D) $115.
Q4) The acid test ratio includes marketable securities but does not include accounts receivable.
A)True B)False
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Chapter 15: Global Business and Accounting
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Sample Questions
Q1) Which of the following is true about foreign trade zones?
A) They are illegal in the United States.
B) Goods imported into these designated U.S. areas are duty free until they leave the zone.
C) They have a special excise tax.
D) They are areas outside the United States that offer special tax treatments.
Q2) When the government uses central planning to allocate resources and to determine output among various segments of the economy, this is known as:
A) A dictatorship.
B) A democracy.
C) A planned economy.
D) A market economy.
Q3) A country whose citizens are highly group-oriented and who accept unequal power distributions between and within organizations would be considered:
A) Individualistic and lower power distance.
B) Collectivist and high power distance.
C) Individualistic and high power distance.
D) Collectivist and low power distance.
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17
Chapter 16: The Time Value of Money
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Q1) Sam Rivers has $3,000 to invest. He must decide whether to invest this money for five years at 10% compounded semi-annually or at 12% compounded annually. Which option should he select?
Q2) A scholarship fund has $75,000 to invest now to provide scholarships to high school students. They want to have at least $150,000 in 8 years. What rate of interest must they invest this money at to reach their goal?
A) 8%.
B) 9%.
C) 10%.
D) 11%.
Q3) The lower the discount rate of an investment, the lower the present value of the investment.
A)True
B)False
Q4) The obligation for deferred income taxes is the only long-term liability that is not reported at its present value.
A)True
B)False
Q5) Explain how compound interest applies to the time value of money.
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