Accounting for Business Question Bank
Course Introduction
Accounting for Business provides students with an essential understanding of the principles and practices of financial and management accounting within the context of modern business operations. The course covers topics such as recording financial transactions, preparing financial statements, analyzing financial performance, budgeting, and making informed financial decisions. Emphasis is placed on the role of accounting information in strategic planning and business management, enabling students to interpret financial data effectively and apply accounting concepts to real-world business scenarios. This foundation supports students in understanding the vital role that accounting plays in organizational success and ethical decision-making.
Recommended Textbook
Financial Accounting Fundamentals 6th Edition by
John J Wild
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Page 2
Chapter 1: Accounting in Business
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Sample Questions
Q1) Grandmark Printing pays $2,000 rent to the landlord of the building where its facilities are located.How does this transaction affect the accounting equation for Grandmark?
A) Assets would decrease $2,000 and liabilities would decrease $2,000.
B) Assets would decrease $2,000 and equity would decrease $2,000.
C) Assets would increase $2,000 and equity would increase $2,000.
D) Assets would increase $2,000 and liabilities would increase $2,000.
E) Liabilities would decrease $2,000 and equity would increase $2,000.
Answer: B
Q2) Define risk and return and discuss the relation between them.
Answer: Net income is often related to return,which is what is earned from investments.Risk is the uncertainty about the return that will be earned.All investments involve risk,but risk and return vary among investment opportunities.In general,the lower the risk of an investment; the lower the expected return.Higher return is expected in exchange for accepting higher risk.
Q3) Cash received from a one-time sale of used office equipment.
A)Financing activity
B)Investing activity
C)Operating activity
Answer: B
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Page 3
Chapter 2: Analyzing for Business Transactions
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Sample Questions
Q1) Wages Payable
A)BS B)IS
Answer: A
Q2) Prepaid Insurance
A)L
B)SE C)R
D)E
E)A
Answer: E
Q3) Accounts Payable
A)L B)SE C)R
D)E
E)A
Answer: A
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Chapter 3: Adjusting Accounts for Financial Statements
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Sample Questions
Q1) A listing of accounts and balances prepared after adjustments are recorded and posted to the ledger.
A)Adjusting entry
B)Unadjusted trial balance
C)Prepaid expenses
D)Natural business year
E)Accrued expenses
F)Adjusted trial balance
G)Report form balance sheet
H)Accounting period
I)Profit margin
J)Contra account
Answer: F
Q2) Discuss the importance of periodic reporting and the time period assumption. Answer: For information to be valuable to decision makers,it must be presented in a timely fashion.To provide timely information for decision making,accounting systems are designed to prepare periodic reports at regular intervals.The time period assumption assumes that an organization's activities can be divided into specific time periods such as months,quarters or years.
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Chapter 4: Accounting for Merchandising Operations
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Sample Questions
Q1) The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.
A)True
B)False
Q2) A company had sales of $350,000 and cost of goods sold of $200,000.Its gross profit equals $150,000.
A)True B)False
Q3) In a periodic inventory system,cost of goods sold is recorded as each sale occurs. A)True B)False
Q4) New revenue recognition rules require that sellers report sales net of expected sales discounts.
A)True B)False
Q5) When a company has no reportable nonoperating activities,its income from operations is reported as ________.
Q6) What is inventory shrinkage? How do managers account for shrinkage?
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Chapter 5: Inventories and Cost of Sales
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Sample Questions
Q1) A company reported the following data:
\[\begin{array} { | l | r | r | }
\hline & \text { Year 1 } & \text { Year 2 } \\
\hline \text { Cost of goods sold } & \$ 425,000 & \$ 486,000 \\
\hline \text { Ending inventory } & 140,000 & 175,000 \\
\hline \end{array}\]
Required:
1.Calculate the days' sales in inventory for each year.
2.Comment on the trend in inventory management.
Q2) The understatement of the ending inventory balance causes:
A) Cost of goods sold to be overstated and net income to be understated.
B) Cost of goods sold to be overstated and net income to be overstated.
C) Cost of goods sold to be understated and net income to be understated.
D) Cost of goods sold to be understated and net income to be overstated.
E) Cost of goods sold to be overstated and net income to be correct.
Q3) The ________ method of assigning costs to inventory and cost of goods sold assumes that the inventory items are sold in the order acquired.
Q4) What advantages does a perpetual inventory system have over periodic inventory system?
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Chapter 6: Cash, fraud, and Internal Controls
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Sample Questions
Q1) During the month of July,Clanton Industries issued a check in the amount of $845 to a supplier on account.The check did not clear the bank during July.In preparing the July 31 bank reconciliation,the company should:
A) Deduct the check amount from the book balance of cash.
B) Add the check amount to the book balance of cash.
C) Deduct the check amount from the bank balance.
D) Add the check amount to the bank balance.
E) Make a journal entry in the company records for an error.
Q2) A company's internal control system:
A) Eliminates the company's risk of loss.
B) Monitors company and employee performance.
C) Eliminates human error.
D) Eliminates the need for audits.
E) Eliminates the need for managers' certification of controls.
Q3) Proper internal control would require that a department manager inform the purchasing department of its needs for additional merchandise by preparing and signing a purchase requisition which lists the merchandise needed and requests that it be purchased.
A)True
B)False
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Chapter 7: Accounting for Receivables
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Sample Questions
Q1) The ________ of a note is the day the principle plus interest of a note must be repaid.
Q2) Amounts owed by customers from credit sales for which payment is required in periodic payments over an extended period of time.
A)Factoring accounts receivable
B)Allowance method
C)Accounts receivable turnover
D)Principal of a note
E)Materiality constraint
F)Installment accounts receivable
G)Pledging accounts receivable
H)Direct write-off method
I)Dishonoring a note
J)Full disclosure principle
Q3) ________ are amounts owed by customers from credit sales where payment is required in periodic amounts over an extended time period.
Q4) Prudence Co.receives a $26,000,90-day,4% note receivable.What is the amount of interest that is due at maturity?
Q5) ________ refers to the expected proceeds from converting an asset into cash.
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Chapter 8: Accounting for Long-Term Assets
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Sample Questions
Q1) Plant assets can be disposed of by discarding,selling,or exchanging them.
A)True
B)False
Q2) Marks Consulting purchased equipment costing $45,000 on January 1,Year 1.The equipment is estimated to have a salvage value of $5,000 and an estimated useful life of 8 years.Straight-line depreciation is used.If the equipment is sold on July 1,Year 5 for $20,000,the journal entry to record the sale will include a:
A) Credit to cash for $20,000.
B) Debit to accumulated depreciation for $22,500.
C) Debit to loss on sale for $10,000.
D) Credit to loss on sale for $10,000.
E) Debit to gain on sale for $2,500.
Q3) A company sold a machine that originally cost $90,000 for $28,000 cash.The accumulated depreciation on this machine was $47,000 at the time of the sale.What was the company's gain or loss on this sale?
Q4) What are some of the variables that make a plant asset's useful life difficult to predict?
Q5) Describe the accounting for natural resources,including their acquisition,cost allocation,and account titles.
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Chapter 9: Accounting for Current Liabilities
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Sample Questions
Q1) Obligations not due within one year or the company's operating cycle,whichever is longer,are reported as current liabilities.
A)True
B)False
Q2) What is the total amount of taxes withheld from the Trey's earnings?
A) $1,375.02
B) $746.50
C) $962.06
D) $1,027.86
E) $680.70
Q3) The difference between the amount received from issuing a note payable and the amount repaid at maturity is referred to as:
A) Interest.
B) Principal.
C) Face Value.
D) Cash.
E) Accounts Payable.
Q4) A company borrowed $60,000 by signing a 60-day,5% note payable from its bank.Compute the total cash payment due on the note's maturity date.
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Chapter 10: Accounting for Long-Term Liabilities
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Sample Questions
Q1) When the contract rate on a bond issue is less than the market rate,the bonds sell at a discount.
A)True
B)False
Q2) Bond interest paid by a corporation is an expense,whereas dividends paid are not an expense of the corporation.
A)True
B)False
Q3) All of the following statements regarding leases are true except:
A) For a capital lease the lessee records the leased item as its own asset.
B) For a capital lease the lessee depreciates the asset acquired under the lease, but for an operating lease the lessee does not.
C) Capital leases create a long-term liability on the balance sheet, but operating leases do not.
D) Capital leases do not transfer ownership of the asset under the lease, but operating leases often do.
E) For an operating lease the lessee reports the lease payments as rental expense.
Q4) An ________ is an obligation requiring a series of payments to the lender.
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Page 12
Chapter 11: Corporate Reporting and Analysis
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Sample Questions
Q1) The amount of annual cash dividends distributed to common shareholders relative to the common stock's market value is the:
A) Dividend payout ratio.
B) Dividend yield.
C) Price-earnings ratio.
D) Current yield.
E) Earnings per share.
Q2) Prior to June 30,a company has never had any treasury stock transactions.A company repurchased 100 shares of its $1 par common stock on June 30 for $40 per share.On July 20,it reissued 50 of these shares at $46 per share.On August 1,it reissued 20 of the shares at $38 per share.What is the journal entry necessary to record the reissuance of treasury stock on July 20?
A) Debit Common Stock $2,300; credit Cash $2,300.
B) Debit Common Stock $20; debit Treasury Stock $2,290; credit Cash $2,300.
C) Debit Common Stock $2,300; credit Treasury Stock $2,000; credit Paid-In Capital, Treasury Stock $300.
D) Debit Cash $2,300; credit Paid-in Capital, Treasury Stock $300; credit Treasury Stock $2,000.
E) Debit Cash $2,300; credit Treasury Stock $2,300.
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Chapter 12: Reporting Cash Flows
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Sample Questions
Q1) Use the information provided to calculate the cash paid for insurance for the period \(\begin{array}{|l|c|}
\hline \text { Prepaid insurance, beginning-year. }& \$7,000 \\
\hline \text { Interest expense. } &16,800 \\
\hline \text {Prepaid insurance, year-end } & 3,400 \\
\hline\text { Cash paid for interest }\\ \hline \end{array}\)
Q2) The statement of cash flows reports:
A) Assets, liabilities, and equity.
B) Revenues, gains, expenses, and losses.
C) Cash inflows and cash outflows for an accounting period.
D) Equity, net income, and dividends.
E) Changes in equity.
Q3) The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.
A)True
B)False
Q4) Explain how cash flows from investing and financing activities are determined.
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Chapter 13: Analysis of Financial Statements
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Sample Questions
Q1) Refer to the following selected financial information from McCormik,LLC.Compute the company's current ratio for Year 2.
A) 2.26.
B) 1.98.
C) 2.95.
D) 3.05.
E) 1.88.
Q2) Powers Company reported Net sales of $1,200,000 and Accounts Receivable,net of $78,500.The Day's sales uncollected (rounded to whole days)is:
A) 24 days.
B) 15 days.
C) 4 days.
D) 56 days.
E) 48 days.
Q3) The building blocks of financial statement analysis include (1)liquidity, (2)solvency, (3)profitability,and (4)market prospects.
A)True
B)False
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Page 15
Chapter 14: Time Value of Money
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Sample Questions
Q1) To calculate present value of an amount,two factors are required: The ________ and the________.
Q2) Mason Company has acquired a machine from a dealer that requires a payment of $45,000 at the end of five years.This transaction includes interest at 8%,compounded semiannually.What is the value of the machine today?
Q3) Paul wants to invest a sum of money today that will accumulate to $50,000 at the end of 4 years.Assuming he can earn an interest rate of 8% compounded semiannually,how much must he invest today? (PV of $1,FV of $1,PVA of $1,and FVA of $1)(Use appropriate factor(s)from the tables provided.)
A) $36,535
B) $27,015
C) $42,740
D) $36,750
E) $31,414
Q4) Explain the concept of the present value of an annuity.
Q5) A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in 7 years.The fund will earn 7% interest,and the company intends to put away a series of equal year-end amounts for 7 years.What is the amount of the annual deposits that the company must make?
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Chapter 15: Investments
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Sample Questions
Q1) If a U.S.Company's credit sale to an international customer allows payment to be made in a foreign currency,the same exchange rate must be used for the date of sale and the cash payment date.
A)True
B)False
Q2) On May 1 of the current year,a company paid $200,000 cash to purchase 6%,10-year bonds with a par value of $200,000; interest is paid semiannually each May 1 and November 1.The company intends to hold these bonds until they mature.Prepare the journal entry to record the receipt of the first semiannual interest payment on November 1.
Q3) Trading securities are securities that are purchased by trading securities with other companies rather than by paying cash.
A)True B)False
Q4) Equity securities reflect a creditor relationship such as investments in notes,bonds,and certificates of deposit.
A)True
B)False
Q5) Return on total assets is computed by dividing ________ by ________.
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Chapter 16: Partnership Accounting
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Q1) In the absence of a partnership agreement,the law says that income of a partnership will be shared equally by the partners.
A)True
B)False
Q2) A ________ is an unincorporated association of two or more people to pursue a business for profit as co-owners.
Q3) The Redtail Partnership agrees to dissolve.The cash balance after selling all assets and paying all liabilities is $56,000.The final capital account balances are: Paulson,$33,000; Gray,$27,000; and Chang, ($4,000).Chang agrees to pay $4,000 cash from personal funds to settle his deficiency.Prepare the journal entries to record the transactions required to dissolve this partnership.
Q4) To buy into an existing partnership,the new partner must contribute cash to the partnership.
A)True
B)False
Q5) Assets invested by a partner into a partnership become the property of the business.
A)True
B)False
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