Accounting for Non-Business Majors Final Exam
Course Introduction
Accounting for Non-Business Majors is an introductory course designed to familiarize students from diverse academic backgrounds with fundamental accounting concepts and practices. This course explores the essential principles of financial and managerial accounting, focusing on how accounting information is generated, communicated, and used in decision-making by individuals and organizations. Topics include the preparation and interpretation of basic financial statements, understanding the accounting cycle, budgeting, cost analysis, and ethical considerations in accounting. The course emphasizes practical applications and aims to equip non-business majors with the financial literacy necessary for personal financial management and participation in various professional environments.
Recommended Textbook
Survey of Accounting 5th Edition by Thomas P Edmonds
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Page 2
Chapter 1: An Introduction to Accounting
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Sample Questions
Q1) Mayberry Company paid $30,000 cash to purchase land. As a result of this business event:
A) Total equity was not affected.
B) The net cash flow from investing activities decreased.
C) Total assets were not affected.
D) Total assets and total equity were not affected, and net cash flow from investing activities decreased.
Answer: D
Q2) At the time of liquidation, Fairchild Company reported assets of $200,000, liabilities of $120,000, common stock of $90,000 and retained earnings of ($10,000). What amount of Fairchild's assets are the shareholders entitled to receive?
A) $200,000
B) $80,000
C) $90,000
D) $100,000
Answer: B
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Chapter 2: Accounting for Accruals and Deferrals
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Sample Questions
Q1) Nelson Company experienced the following transactions during Year 1, its first year in operation. 1. Issued $12,000 of common stock to stockholders.
2) Provided $4,600 of services on account.
3) Paid $3,200 cash for operating expenses.
4) Collected $3,800 of cash from accounts receivable.
5) Paid a $200 cash dividend to stockholders.
The total amount of assets shown on Nelson Company's December 31, Year 1 balance sheet is:
A) $12,400.
B) $12,600.
C) $13,400.
D) $13,200.
Answer: D
Q2) Which of the following accounts would not appear on a balance sheet?
A) Service Revenue.
B) Salaries Payable.
C) Unearned Revenue.
D) Neither Service Revenue nor Unearned Revenue would appear on a balance sheet.
Answer: A
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Chapter 3: Accounting for Merchandising Businesses
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Sample Questions
Q1) Under a periodic system, the payment of shipping costs on goods received from the vendor will increase the:
A) merchandise inventory account.
B) cost of goods sold account.
C) transportation-out account.
D) transportation-in account.
Answer: D
Q2) Net sales is calculated by subtracting cost of goods sold from sales revenue.
A)True
B)False
Answer: False
Q3) The adjusting entry to record the amount of inventory shrinkage affects both the balance sheet and the income statement.
A)True
B)False
Answer: True
Q4) Selling costs are recognized as expenses in the period when goods are sold.
A)True
B)False
Answer: False
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Chapter 4: Internal Controls, Accounting for Cash, and Ethics
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Sample Questions
Q1) Preparing a bank reconciliation is a requirement to obtain an unqualified audit opinion, but is not an important internal control for a business.
A)True
B)False
Q2) Which of the following is an internal control procedure used to safeguard a company's assets?
A) Timely deposits of cash receipts into a checking account
B) Separation of duties
C) Reconciliation of the bank statement
D) All of these answer choices are correct.
Q3) Which document issued by a bank reflects a transaction that decreases a company's checking account balance?
A) A debit entry
B) A debit memo
C) A credit memo
D) A reconciling entry
Q4) The primary focus of financial statement audits is the discovery of fraud.
A)True
B)False
6
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Chapter 5: Accounting for Receivables and Inventory Cost Flow
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Sample Questions
Q1) When the cost of purchasing inventory is declining, which inventory cost flow method will produce the highest amount of cost of goods sold?
A) Weighted average
B) LIFO
C) FIFO
D) LIFO, FIFO, and weighted average will all produce the same amount of cost of goods sold.
Q2) During a period of rising prices, the amount of ending inventory reported on the balance sheet will be lower using the LIFO cost flow method than with FIFO.
A)True
B)False
Q3) The year-end adjusting entry to accrue interest on a note receivable is an asset source transaction.
A)True
B)False
Q4) The collection of an account receivable is an asset source transaction.
A)True
B)False
Page 7
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Chapter 6: Accounting for Long-Term Operational Assets
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Sample Questions
Q1) Glick Company purchased oil rights on July 1, Year 1 for $2,400,000. If 200,000 barrels of oil are expected to be extracted over the asset's life, and 30,000 barrels are extracted and sold in Year 1, the recognition of depletion expense on December 31, Year 1 would cause:
A) a reduction in equity of $200,000.
B) a reduction in assets of $360,000.
C) a reduction in assets of $300,000.
D) an increase in equity of $400,000.
Q2) Indicate whether each of the following statements is true or false.
_____ a) A trademark has an identifiable legal lifetime.
_____ b) U.S. GAAP requires that research and development costs be capitalized as assets and then expensed over a reasonable period of time.
_____ c) A patent is amortized over the longer of its legal life or useful life.
_____ d) The entry to record the amortization of a patent includes an increase to Amortization Expense, Patent and a decrease to Patent.
_____e) The capitalized cost of a trademark includes the cost to develop the trademark and to defend it.
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Chapter 7: Accounting for Liabilities
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Sample Questions
Q1) The carrying value of a bond issued at a premium:
A) decreases by equal amounts each year if straight-line amortization is used.
B) decreases by equal amounts each year if effective interest amortization is used.
C) decreases by larger and larger amounts each year if effective interest amortization is used.
D) decreases by equal amounts each year if straight-line amortization is used and decreases by increasing amounts each year if effective interest amortization is used.
Q2) All lawsuits in which a company has been named a defendant should be either disclosed in the company's notes to the financial statements, or recognized as a liability on its balance sheet.
A)True
B)False
Q3) If a bond is sold at 101, its stated rate of interest would be:
A) equal to the market rate.
B) unrelated to the market rate.
C) higher than the market rate.
D) lower than the market rate.
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Chapter 8: Proprietorships, Partnerships, and Corporations
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Sample Questions
Q1) Llewelyn Company purchased 1,000 shares of its own $10 par value common stock when the market price of the stock was $36 per share. How would this event affect the company's financial statements?
A) Increase the treasury stock account and increase the paid-in capital account in excess of par value common account by $10,000.
B) Increase the treasury stock account and decrease the cash account by $36,000.
C) Increase the treasury stock account by $36,000, increase the common stock account by $10,000, and increase the paid-in capital account in excess of par value common account by $26,000.
D) Increase the cash account by $36,000, decrease the treasury stock account by $10,000, and increase the paid-in capital account in excess of par Common account by $26,000.
Q2) Liability is a significant disadvantage of the partnership form of business organization.
A)True
B)False
Q3) The class or type of stock that every corporation must have is preferred stock.
A)True
B)False
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Page 10
Chapter 9: Financial Statement Analysis
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Sample Questions
Q1) If the company purchased a $60,000 piece of equipment by paying $30,000 and having the rest financed with a short-term note from the bank, then immediately after this transaction what is the expected impact on the components of the current ratio?
A) Current assets decrease and current liabilities increase by the same amount.
B) Current liabilities decrease.
C) Current assets and current liabilities decrease by the same amount.
D) Current assets increase.
Q2) Which of the following is not included in the computation of the quick ratio?
A) Cash
B) Prepaid expenses
C) Accounts receivable
D) Marketable securities
Q3) Benson Company received cash of $1,000,000 from issuing common stock at par value. As a result of this transaction, the company's debt to equity ratio will:
A) Decrease.
B) Increase.
C) Remain the same.
D) Cannot be determined.
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Chapter 10: An Introduction to Management Accounting
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Sample Questions
Q1) Managerial accounting focuses primarily on the performance of the company as a whole.
A)True
B)False
Q2) Select the incorrect statement regarding service companies.
A) Because service companies do not carry inventory, it is impossible to determine product costs.
B) Because the products of service companies are consumed immediately, there is no finished goods inventory on their balance sheets.
C) Managers of service companies are expected to control costs, improve quality, and increase productivity just like managers of manufacturing companies.
D) Material, labor, and overhead costs of service companies are treated as period costs.
Q3) Managerial accounting systems consider economic and non-financial data as well as financial statement data.
A)True
B)False
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Chapter 11: Cost Behavior, Operating Leverage, and Profitability Analysis
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Sample Questions
Q1) Columbus Industries makes a product that sells for $25 a unit. The product has a $5 per unit variable cost and total fixed costs of $9,000. At budgeted sales of 2,000 units, the margin of safety ratio is:
A) 22.5%.
B) 10%.
C) 77.5%.
D) None of these.
Q2) Mug Shots operates a chain of coffee shops. The company pays rent of $15,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The managers of each shop are paid a salary of $2,500 per month and all other employees are paid on an hourly basis. The cost of rent relative to the number of customers in a particular shop and relative to the number of customers in the entire chain of shops is which kind of cost, respectively?
A) Variable cost and fixed cost
B) Fixed cost and fixed cost
C) Fixed cost and variable cost
D) Variable cost and variable cost
Q3) Cost Structure
Q4) Variable cost
Page 13
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Chapter 12: Cost Accumulation, Tracing, and Allocation
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Sample Questions
Q1) Cost allocation involves:
A) Identifying a cost driver for each cost to be allocated.
B) Calculating an allocation rate for each cost to be allocated.
C) Multiplying the allocation rate by the weight of the cost driver.
D) All of the answers are correct.
Q2) Which of the following is not a true statement regarding the pooling of indirect costs?
A) Costs that have been pooled for one purpose may require disaggregation for a different purpose.
B) Pooling costs that have different cost drivers may result in unreliable cost allocation.
C) A single cost pool will have more than one cost driver for different cost objects.
D) Pooled costs may require disaggregation when allocating costs for different purposes.
Q3) Indirect costs should not be pooled unless they share a common cost driver.
A)True
B)False
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14
Chapter 13: Relevant Information for Special Decisions
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Sample Questions
Q1) Mountain Gear has been using the same machines to make its name brand clothing for the last five years. A cost efficiency consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery. The old machines cost the company $100,000. The old machines presently have a book value of $60,000 and a market value of $6,000. They are expected to have a five-year remaining life and zero salvage value. The new machines would cost the company $50,000 and have operating expenses of $9,000 a year. The new machines are expected to have a five-year useful life and no salvage value. The operating expenses associated with the old machines are $15,000 a year. The new machines are expected to increase quality, justifying a price increase, and thereby increasing sales revenue by $5,000 a year. Select the true statement.
A) The company will be $11,000 better off over the 5-year period if it replaces the old equipment.
B) The company will be $20,000 better off over the 5-year period if it keeps the old equipment.
C) The company will be $12,000 better off over the 5-year period if it replaces the old equipment.
D) The company will be $6,000 better off over the 5-year period if it replaces the old equipment.
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Page 15
Chapter 14: Planning for Profit and Cost Control
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Sample Questions
Q1) Which of the following would appear on a selling and administrative expense budget, but would not appear on a schedule of cash payments for selling and administrative expenses?
A) Cost of goods sold
B) Depreciation expense
C) Salary expense
D) Sales expense
Q2) The responsibility for the coordination of a company's budgeting activities normally rests with the Chief Financial Officer (CFO).
A)True
B)False
Q3) Depreciation expense will appear on the schedule of cash payments for selling and administrative expenses.
A)True
B)False
Q4) The basic cash budget format is: Total cash available - Total cash disbursed = Surplus or shortage of cash +/- Effects of financing = Ending cash.
A)True
B)False
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Chapter 15: Performance Evaluation
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Sample Questions
Q1) Which of the following statements regarding profit centers is correct?
A) A manager of a profit center has more responsibility than a manager of an investment center.
B) A manager of profit center is evaluated only on his/her ability to control costs.
C) A manager of a profit center is evaluated on his/her ability to control costs and generate revenues.
D) A manager of a profit center is responsible for assets, liabilities, and earnings.
Q2) Jared expects to charge $60 per hour for his industrial maintenance business during the following year. He expects to reach 50,000 hours at that price. Jared's partner disagrees with the estimate and expects closer to 40,000 hours. What should Jared do when preparing the budget for the year?
A) Create a flexible budget showing a range of outcomes between 40,000 hours and 50,000 hours.
B) Create two master budgets, one at 50,000 hours and one at 40,000 hours.
C) Create only one budget at the more optimistic volume of 50,000 hours.
D) Create a volume budget based on actual performance.
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Chapter 16: Planning for Capital Investments
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Sample Questions
Q1) The process by which management evaluates long-term investment decisions involving long term operational assets is called:
A) capital investment analysis.
B) activity based management.
C) strategic business analysis.
D) fixed cost analysis.
Q2) If a company has to pay a given amount of income taxes over the life of a capital investment, managers of the company should seek to pay the taxes as early as possible in the investment's life.
A)True
B)False
Q3) The time value of money concept recognizes the fact that the present value of a dollar to be received in the future is worth more than a dollar.
A)True
B)False
Q4) The cost of capital is sometimes referred to as the hurdle or discount rate.
A)True
B)False
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