Accounting for Business Mock Exam
Course Introduction
Accounting for Business introduces students to the fundamental principles and practices of accounting within a business context. This course covers key topics such as financial statement preparation and analysis, the accounting cycle, internal controls, and the interpretation of accounting information to support managerial decision-making. Students will develop an understanding of the role of accounting in planning, controlling, and evaluating business operations, as well as an appreciation for ethical considerations and regulatory requirements in financial reporting. Emphasis is placed on real-world applications and the use of accounting information in strategic business decisions.
Recommended Textbook
Introduction to Accounting An Integrated Approach 6th Edition by Penne Ainsworth
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Page 2
Chapter 1: Accounting and Business
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Sample Questions
Q1) Which of the following is an example of a liability?
A)An amount which must be paid to a business that sold you some supplies
B)The obligation to transfer the net assets of the business to its owners
C)Equipment purchased by the business on a long-term payment plan
D)The amount contributed to the business by your partner
Answer: A
Q2) Every three months,Ashmont Antiques produces a report showing profits earned during the most recently ended quarter.This best describes an application of the:
A)business entity concept
B)periodicity concept
C)monetary unit concept
D)going concern concept
Answer: B
Q3) Which of the following would best describe the type of business Disney operates?
A)Service
B)Service and Manufacturing
C)Service and Merchandising
D)Service,Merchandising,and Manufacturing
Answer: D
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Page 3
Chapter 2: Business Processes and Accounting Information
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Sample Questions
Q1) Morland Corp purchased a building that will house its new manufacturing plant.This is part of Morland's
A)operating activities
B)investing Activities
C)financing Activities
D.planning Activities
Answer: B
Q2) Ethan Fromme is the Purchaser for Hardware Hut,a company with several hardware stores.He prepares purchase orders for merchandise and places the orders with manufacturers.Although he does not physically receive the merchandise,he is responsible for checking the invoice against the purchase order and authorizing payment of the invoice.Describe internal control this arrangement causes.
Answer: Because Mr.Fromme is responsible for both ordering the merchandise and checking the invoice,he could place fictitious orders and authorize payment for them.If he worked out an "arrangement" with a supplier,it would be possible for him to divert part of an order and sell it.He could submit fictitious invoices and authorize their payment.He could,through collusion with a supplier,overpay invoices and pocket the excess.
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Page 4
Chapter 3: Operating Processes: Planning and Control
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Sample Questions
Q1) A cost that is constant per unit but varies in total is called a(n):
A)Activity cost
B)Variable cost
C)Fixed cost
D)Mixed cost
Answer: B
Q2) The accounting department at Alaska Enterprises,Inc.is running low on office supplies.The accounting manager has asked you to obtain additional supplies.Describe all the steps necessary to arrange for the acquisition and payment for the supplies.Identify all documents that would be utilized during this process,as well as the person or department that would prepare the document.
Answer: The accounting clerk would prepare a purchase requisition listing the supplies needed.The requisition would be signed by the accounting manager and sent to the purchasing department.The purchasing department would prepare a purchase order and send it to the vendor to order the supplies.The supplies would arrive in the receiving department where a receiving report would be prepared.Finally,an invoice would arrive from the vendor and payment would be made after verifying the accuracy of the invoice by reference to the purchase requisition,purchase order and receiving report.
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Chapter 4: Short-Term Decision Making
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Sample Questions
Q1) Promotion Industries manufacturers license plates for automobiles.The license plates sell for $10.50 each.During 2008,Miller sold 750,000 plates incurring total variable costs of $1,462,500 and fixed costs of $3,268,720.
(a)Determine the contribution margin per unit.
(b)Determine the breakeven point in units for 2008.
(c)Determine the amount of profit earned in 2008.
(d)Determine the breakeven point in units for 2009,assuming variable costs increase by 20% and fixed costs remain unchanged
Q2) Kapalua,Inc.manufactures hand held planners.Total fixed costs are $3,950,000,with variable costs per unit of $148.28.The corporate tax rate is 35%.If Kapalua can sell 39,242 units,the per unit selling price necessary to earn an after-tax profit of $1,430,000 must be:
A)$305.00
B)$285.38
C)$353.05
D)$248.94
Q3) Explain the effect on breakeven point of an (a)increase in sales price,(b)a decrease in materials cost,and (c)an increase in insurance cost on the factory.
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Chapter 5: Strategic Planning Regarding Operating Processes
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Sample Questions
Q1) Which of the following is not involved in Pure Competition
A)Cotton farmer in Texas
B)National Basketball Association franchise
C)Starbucks
D)Macy's
Q2) Which of the following is not a factor in the EOQ inventory model?
A)Annual demand for the inventory in units
B)Cost of the inventory item
C)Cost to place one additional order
D)Cost to carry one additional unit in inventory
Q3) Which of the following is not a key feature of a JIT inventory system?
A)Quality and reliable suppliers
B)Adequate safety stock
C)Well-trained employees
D)Customer demand pulls the system
Q4) Zeigler Corp's monthly payroll is $200,000.If the FICA rate is 7.65% ,income tax is withheld at a 15% rate,the State Unemployment (SUTA)
A)rate is 2.8% and the Federal Unemployment (FUTA)
A)tax rate is .8%,how much is withheld from the workers' wages and how much does Malsom have to pay in payroll taxes?
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Chapter 6: Planning, The Balanced Scorecard, and Budgeting
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Sample Questions
Q1) The unit production requirements for May are:
A)280,000
B)289,750
C)331,750
D)373,750
Q2) Which of the following is not one of the benefits of budgeting?
A)understanding of the interaction among different parts of the firm
B)ensures that resources are allocated to value-added activities
C)aids management in identifying areas requiring correction
D)eliminates mistakes
Q3) Lyle Industries sold 80,000 ice chests at $30 each during April of 2010.Unit sales are projected to increase 5% in May and June while the selling price will be increased by $2.00 for May and another $1 in June.The estimated sales revenue for June of 2010 is:
A)$2,772,000
B)$2,910,600
C)$2,822,400
D)$2,640,000
Q4) What information must a firm have to prepare a sales budget? How does it get this information?
Page 8
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Chapter 7: Accounting Information Systems
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Sample Questions
Q1) After closing entries are made which of the following grouping of accounts will all have balances?
A)Assets,Revenue,Liability
B)Liabilities,Assets,Expenses
C)Owners' Equity,Assets,Liabilities
D)Assets,Liabilities,Expenses
Q2) On April 1,2010,a firm borrowed $100,000 on a 6% note.The note is due on April 1,2011.No interest is to be paid until then.What amount of interest expense should it report in its income statement for December 31,2010?
A)$0
B)$1,500
C)$4,500
D)$6,000
Q3) Which of the following is not an accounting event?
A)A customer places an order for goods.
B)A firm issues stock for cash.
C)A firm received,but did not pay,a bill for advertising.
D)A firm purchased equipment on account.
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9
Chapter 8: Purchasinghuman Resourcespayment Process:
Recording and Evaluating Expenditure Process Activities
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Sample Questions
Q1) Orleans Enterprises purchased $37,500 of merchandise on account,terms 2/10,n/30.Assuming Orleans uses the net price method to account for purchase discounts,and it pays for the merchandise on the 30th day after the invoice date,the journal entry to record the payment would include a:
A)credit to Cash for $36,750
B)credit to Inventory for $37,500
C)debit to Accounts Payable for $37,500
D)debit to Purchase Discounts Lost for $750
Q2) BLP Corporation reported wages expense of $224,000,wages payable of $89,400 at the beginning of the year,and wages payable of $71,300 at the end of the year.Cash payments for wages during the year were:
A)$205,900
B)$224,000
C)$242,100
D)$295,300
Q3) If a firm overstates its ending inventory,how are its income statement and balance sheet affected for the current and next year?
Q4) Why would the amount of supplies expense differ from the amount of cash paid for supplies in a year?
10
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Chapter 9: Recording and Evaluating Conversion Process Activities
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Sample Questions
Q1) The differences between standard and actual financial amounts of inputs are referred to as:
A)standard deviations
B)variances
C)appraisals
D)exceptions
Q2) Suranden Company manufacturers oil-drilling equipment.The utilities costs incurred in machining the drilling equipment is an example of what kind of cost?
A)product sustaining
B)facility sustaining
C)batch related
D)unit related
Q3) The direct materials inventory variance is calculated as:
A)(Actual Price - Standard Price)x Actual Quantity Used
B)(Standard Price - Actual Price)x Standard Quantity Allowed
C)(Actual Quantity Used - Actual Quantity Purchased)x Actual Price
D)(Actual Quantity Purchased - Actual Quantity Used)x Standard Price
Q4) Dynamic company has an unfavorable material price variances and a favorable usage variance.Explain what might have caused both variances.
11
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Chapter 10: Recording and Evaluating Revenue Process
Activities
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Sample Questions
Q1) One example of a contra-asset is:
A)Sales Discount
B)Sales Returns and Allowances
C)Uncollectible Accounts Expense
D)None of the above are contra assets.
Q2) In periods of rising prices LIFO result in lower income tax expense than FIFO? Explain why this occurs.
Q3) Explain how the write off of an accounts receivable will not affect the amount of net accounts receivable.
Q4) According to generally accepted accounting principles,the objective in choosing a cost flow assumption is "matching of appropriate costs against revenues in order that there may be a proper determination of the realized income" [ARB43,ch4,¶4].In light of this statement,is FIFO or LIFO more appropriate? Justify your answer.
Q5) The cost of goods sold for the June 16th sale is:
A)$650
B)$665
C)$715
D)$780
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Q6) Briefly describe the makeup of ending inventory under the FIFO and LIFO methods.
Chapter 11: Time Value of Money
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Sample Questions
Q1) How will the present value of a future amount be affected if the interest rate is lowered.
A)The present value will increase
B)The present value will decrease
C)The present value will not change
D)Must know the amount of the future value before this can be answered
Q2) Champion Contractors Corp is trying to decide which of two machines to buy.The price of the machines and their respective cash flows are described below.The decision to buy is based on which of the two machines produces the largest rate of return.Given the information below which of the machines should Champion buy?
Machine A: Cost $130,000 and will produce $36,063.27 each year for 5 years Machine B: Cost $125,000 and will produce $16,188.07 every 6 months for 5 years (10 pmts).
Q3) You are going to put $4,000 into a savings account every six months starting Sept 1,2010 and ending on March 1,2014.How much will be in the savings account on March 1,2014 if you can earn a 6% annual rate?
Q4) Acme Company wants to have $1,200,000 twenty years from today.How much must it put in the bank today to achieve this goal if it can earn 8 percent that is compounded monthly?
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Chapter 12: Planning Investments: Capital Budgeting
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Sample Questions
Q1) Ignoring income taxes,the net-present-value of the investment in the computer is:
A)$(3,791)
B)$(709)
C)$3,500
D)$10,781
Q2) Capital investments in operating assets are made:
A)For expansion purposes
B)To comply with government mandates
C)To replace unproductive operating assets
D)All of the above are correct
Q3) Which of the following must be estimated in order to compute the net present value of an investment?
A)Cost of capital,future cash flows,and initial cost
B)Cost of capital,future cash flows,or initial cost
C)Initial cost,future cash flows,and residual value
D)Initial cost,future income tax rates,and residual value
Q4) Explain why both the timing and quantity of cash flows are significant in determining net present value.
Q5) Why should qualitative factors be considered in the capital budgeting process?
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Chapter 13: Planning Equity Financing
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Sample Questions
Q1) Which of the following is not a source of financing for a firm?
A)Selling asset of the firm.
B)Issuing stock for cash
C)Issuing a note to borrow cash
D)Net income
Q2) Starfury Corporation has 1,000,000,$1 par shares of common stock authorized.A total of 400,000 shares have been sold to stockholders and 10,000 shares have been repurchased by the firm.How many shares are outstanding?
A)1,000,000
B)600,000
C)400,000
D)390,000
Q3) Which of the following is a disadvantage of partnerships?
A)Ease of formation
B)Income is not taxed twice
C)Mutual agency
D)Owners manage the firm
Q4) What is a DRIP? How can it be advantageous to both a corporation and its stockholders?
Q5) Explain the relationship between a stock's par value and its market value.
Page 15
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Chapter 14: Planning Debt Financing
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Sample Questions
Q1) What does discount on a note payable represent?
A)loss from borrowing
B)gain from borrowing
C)additional interest expense over the term of the note
D)additional interest revenue over the term of the note
Q2) The cash proceed from a note is dependant on which of the following?
A)Market interest rate
B)Face interest rate
C)Face value of the note
D)All of the above
Q3) "All other things being equal,a convertible bond should sell at a higher price than a straight bond." Is this statement accurate? Why or why not?
Q4) Spurt Company issued a 3-year,non-interest-bearing note on January 1,2010.At what amount should the note be reported on the December 31,2010,balance sheet?
A)face amount
B)face amount plus discount amortized
C)face amount plus unamortized discount
D)face amount minus unamortized discount
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Chapter 15: Recording and Evaluating Capital Resource
Process Activities: Financing
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Sample Questions
Q1) In a noninterest-bearing note,the amount borrowed is which of the following?
A)face value of the note
B)face value of the note less the discount on note payable
C)face value of the note plus a premium on the note payable
D)face value of the note less interest expense calculated at the face rate of interest
Q2) On the maturity date of bonds issued at a premium:
A)the Premium on Bonds Payable account is zero
B)the carrying value of the bonds is greater than face value
C)the carrying value of the bonds is less than face value
D)both a and b are correct
Q3) As the Premium on Notes Payable account is reduced:
A)Interest Expense is increased
B)the market value of the note is also reduced
C)the carrying value of the note is decreased
D)the face rate of interest is increased
Q4) Compare stock splits and stock dividends in terms of effect on stockholders' equity and market price.
Q5) Why are operating leases sometimes referred to as "off-the-balance-sheet financing".
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Chapter 16: Recording and Evaluating Capital Resource
Process Activities: Investing
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Sample Questions
Q1) Olympic Products,Inc.acquired some land,several buildings,and various pieces of equipment at a total cost of $5,600,000.Independent appraisals valued the land at $2,100,000,the buildings at $3,400,000,and the equipment at $500,000.The owner of the company thinks the land should be valued at $1,000,000,the buildings at $3,850,000 and the equipment at $750,000.Using the most appropriate method,what dollar amount should be assigned to each category of asset? Is there any reason the owner might want a higher or lower value assigned to any of the three asset categories?
Q2) On January 1,2010,Boyd Corporation purchased a piece of equipment for $50,000,will pay $1,500 in property tax during the year,paid $500 to have it delivered,paid $1,000 to have it installed,paid $300 for 1 year of insurance,and paid $1,800 in sales tax.If the equipment has a ten year life and a $2,000 salvage value what will be the depreciation of the equipment for 2010 if straight-line depreciation is used.
A)$4,800
B)$5,330
C)$5,130
D)$5,150
Q3) Comment on this statement: "Salvage value is ignored when the declining balance depreciation method is used."
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Chapter 17: Company Performance: Profitability
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Sample Questions
Q1) The firm's comprehensive income for 2008 was:
A)$110,000
B)$102,000
C)$ 80,000
D)unable to determine from the information given
Q2) Income tax expense is deducted in determining:
A)total revenue
B)gross margin
C)income from operations
D)income from continuing operations
Q3) Under unit-variable costing,
A)companies can increase income by increasing the number of units produced
B)all product and period costs are included in cost of goods sold
C)only costs that vary per unit are included in cost of goods sold
D)only direct material costs are included in cost of goods sold
Q4) Kaiser Corporation's net income for 2010 is:
A)$3,001,700
B)$4,306,000
C)$4,450,000
D)$4,618,000
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Chapter 18: Company Performance: Owners Equity and Financial Position
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Q1) Which of the following assets is most likely to be omitted from the balance sheet?
A)land
B)inventory
C)goodwill generated by the firm
D)deferred tax asset
Q2) Assets are shown on the balance sheet at
A)historical cost
B)fair market value
C)net realizable value
D)all of the above
Q3) Equipment would be reported on the balance sheet as a(n):
A)long-term investment
B)intangible asset
C)current asset
D)property,plant,and equipment asset
Q4) How can a balance sheet predict a company's future net income?
Q5) Create the current asset section of the balance sheet.Include a heading and a list of at least 5 accounts typically found in the current asset section of the balance sheet.
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Chapter 19: Company Performance: Cash Flows
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Q1) Cash payments for dividends would be reported in the following section of the statement of cash flows:
A)investing activities
B)operating activities
C)financing activities
D)noncash investing and financing activities
Q2) Cash paid for interest on a note payable would be found in the ______ section of the cash flow statement.
A)investing
B)financing
C)operating
D)Both A and B
Q3) In 2010 Penoke Corporation retired $1,000,000 of its long-term bonds early and as a result of the transaction generated a gain of $100,000.How much cash did Penoke pay to retire the bonds early and in what section would the cash payment be reported on the statement of cash flows?
Q4) Since the statement of cash flows is so useful,why doesn't FASB substitute it for the income statement?
Q5) What are the four primary purposes of the statement of cash flows?
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Chapter 20: Company Performance: Comprehensive Evaluation
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Q1) Write out the dividend yield ratio ( Show your work here).
Explain how the dividend yield ratio is used.
Q2) When conducting an audit,the auditor can render one of the following.Which one indicates that the auditor was not able to complete the audit and the CPA can not render an opinion.
A)Adverse Opinion
B)Disclaimer
C)Unqualified Opinion
D)Qualified Opinion
Q3) When decision-makers want to know how well a firm manages the amounts owed to them by customers as compared to other firm's,they should use
A)current ratio
B)asset turnover
C)cash flow per share
D)average collection period
Q4) The return on owners' equity for 2010 was:
A)35.0%
B)58.8%
C)60.7%
D)65.3%
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