Accounting for Non-Business Majors Review Questions
Course Introduction
Accounting for Non-Business Majors offers an essential introduction to the principles and practices of accounting tailored for students without a business background. This course emphasizes understanding financial statements, basic bookkeeping processes, and the role of accounting information in personal and organizational decision-making. Students will learn to interpret financial data, apply fundamental accounting concepts, and analyze real-world scenarios to develop practical financial literacy skills applicable to a wide range of disciplines and everyday life situations.
Recommended Textbook
Survey of Accounting 5th Edition by Thomas P Edmonds
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16 Chapters
1698 Verified Questions
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2
Chapter 1: An Introduction to Accounting
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Sample Questions
Q1) During Year 2, Chico Company earned $1,950 of cash revenue, paid $1,600 of cash expenses, and paid a $150 cash dividend to its owners. Based on this information alone, which of the following is not correct?
A) Net income amounted to $350.
B) Total assets increased by $200.
C) Cash inflow from operating activities was $350.
D) Cash inflow from operating activities was $200.
Answer: D
Q2) Stosch Company's balance sheet reported assets of $40,000, liabilities of $15,000 and common stock of $12,000 as of December 31, Year 1. If Retained Earnings on the balance sheet as of December 31, Year 2, amount to $18,000 and Stosch paid a $14,000 dividend during Year 2, then the amount of net income for Year 2 was which of the following?
A) $17,000
B) $19,000
C) $13,000
D) $21,000
Answer: B
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Page 3
Chapter 2: Accounting for Accruals and Deferrals
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Sample Questions
Q1) Asset use transactions always involve the payment of cash.
A)True
B)False
Answer: False
Q2) If retained earnings decreased during the year, and no dividends were paid, which of the following must be true?
A) Expenses for the year exceeded revenues
B) The company did not have enough cash to pay its expenses
C) Total equity decreased
D) Liabilities increased during the year
Answer: A
Q3) Earning revenue on account would be classified as a/an?
A) claims exchange transaction.
B) asset use transaction.
C) asset source transaction.
D) asset exchange transaction.
Answer: C
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Page 4
Chapter 3: Accounting for Merchandising Businesses
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105 Flashcards
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Sample Questions
Q1) Abbott Company purchased $6,500 of merchandise inventory on account. Advent uses the perpetual inventory method. How does this transaction affect the financial statements?
A) Decrease accounts payable and decrease purchases.
B) Increase inventory and increase accounts payable.
C) Increase cost of goods sold and increase accounts payable.
D) Decrease accounts payable and decrease inventory.
Answer: B
Q2) Which of the following is considered a period cost?
A) Transportation cost on goods received from suppliers.
B) Advertising expense for the current month.
C) Cost of merchandise purchased.
D) None of these answer choices are considered a period cost.
Answer: B
Q3) 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) A business learns about customers' NSF checks through debit memos that are included with the bank statement.
A)True
B)False
Q2) Which of the following is not one of the purposes of an internal control system?
A) Safeguarding the company's assets
B) The evaluation of performance
C) The assessment of the degree of compliance with company policies and public laws
D) Ensuring that the company is using the most effective marketing plan
Q3) Which of the following is not considered an accounting control?
A) Requiring employees to take vacations
B) Performance evaluations
C) Bonding of employees
D) Use of prenumbered documents
Q4) Effective internal controls for cash include:
A) disbursements made by prenumbered check.
B) cash deposited in the bank on a timely basis.
C) written cash receipts given to customers as evidence of payment.
D) all of these answer choices are correct.
6
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Chapter 5: Accounting for Receivables and Inventory Cost
Flow
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Sample Questions
Q1) Koontz Company uses the perpetual inventory method. On January 1, Year 1, the company's first day of operations, Koontz purchased 400 units of inventory that cost $7.50 each. On January 10, Year 1, the company purchased an additional 600 units of inventory that cost $9.00 each. If Koontz uses a weighted average cost flow method and sells 550 units of inventory, the amount of inventory appearing on balance sheet following the sale will be approximately:
A) $3,780.
B) $4,738.
C) $3,080.
D) $3,713.
Q2) Using the allowance method of accounting for uncollectible receivables requires an estimate of the amount of receivables that will not be collected.
A)True
B)False
Q3) International Financial Reporting Standards (IFRS) do not permit the use of the LIFO cost flow assumption.
A)True
B)False
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Chapter 6: Accounting for Long-Term Operational Assets
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Sample Questions
Q1) Tangible assets include land, equipment, and goodwill.
A)True
B)False
Q2) An expenditure that improves the quality of service provided by a plant asset is added to the historical cost of the asset.
A)True
B)False
Q3) On January 1, Year 1, Stiller Company paid $80,000 to obtain a patent. Stiller expected to use the patent for 5 years before it became technologically obsolete. The remaining legal life of the patent was 8 years. Based on this information, the amount of amortization expense on the December 31, Year 3 income statement and the book value of the patent on the December 31, Year 3, balance sheet, respectively, would be:
A) $10,000 and $30,000
B) $16,000 and $48,000
C) $10,000 and $50,000
D) $16,000 and $32,000
Q4) Intangible assets include patents, copyrights, and franchises.
A)True
B)False
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Chapter 7: Accounting for Liabilities
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Sample Questions
Q1) Payment of interest on a note payable is considered a financing activity on the statement of cash flows.
A)True
B)False
Q2) Indicate whether each of the following statements is true or false.
_____ a) An eight-month, 6% note for $10,000 will require the issuer to pay $600 in interest.
_____ b) Interest expense is considered an operating expense on the income statement.
_____ c) Payment of interest is considered an operating activity on the statement of cash flows.
_____ d) Payment of interest on a one-year note due on March 1 will include a reduction in liabilities.
_____ e) The accrual of interest expense is an asset use transaction.
Q3) Which of the following is a claims exchange transaction?
A) Accrued interest on a note payable.
B) Issued a note to purchase equipment.
C) Repaid principal on a note payable.
D) Paid interest on a note payable.
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Page 9
Chapter 8: Proprietorships, Partnerships, and Corporations
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Sample Questions
Q1) Flagler Corporation shows a total of $660,000 in its common stock account and $1,600,000 in its paid-in capital in excess of par value - common stock account. The par value of Flagler's common stock is $8. How many shares of Flagler stock have been issued?
A) 117,500
B) 200,000
C) 82,500
D) It cannot be determined
Q2) Indicate whether each of the following statements about stockholders' equity is true or false.
_____ a) The balance in the treasury stock account increases total stockholders' equity. _____ b) A company may acquire treasury stock in an effort to increase the market price of its stock.
_____ c) The declaration and distribution of a stock dividend reduces retained earnings.
_____ d) A 2-for-1 stock split will probably double the monetary value of each investor's holdings on the date the split takes effect.
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Chapter 9: Financial Statement Analysis
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Sample Questions
Q1) Which ratio measures how effectively a company is using assets to generate revenue?
A) Net margin
B) Plant assets to long-term liabilities
C) Asset turnover
D) Inventory turnover
Q2) Jenkins Company's current ratio is higher than the average for its industry, while its quick ratio is below the industry average. One possible interpretation for these results is that Jenkins carries less inventory than most companies in its industry.
A)True
B)False
Q3) Profitability ratios attempt to assess the company's ability to generate earnings.
A)True
B)False
Q4) The only requirement involved in communicating useful information is that the information be accurate.
A)True
B)False
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Chapter 10: An Introduction to Management Accounting
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Sample Questions
Q1) The sequence of activities through which an organization provides products to its customers is called a supply chain.
A)True
B)False
Q2) All of the following are downstream costs except:
A) packaging costs
B) advertising
C) research and development
D) sales commissions
Q3) Warren Company applies overhead based on direct labor cost. Warren Company estimated that it would incur $180,000 in manufacturing overhead costs and $120,000 of direct labor costs during the current year. Actual manufacturing overhead cost totaled $150,000 and actual direct labor costs totaled $110,000 during the current year. If total manufacturing costs were $320,000, what amount of direct materials was used during the year?
A) $60,000
B) $30,000
C) $45,000
D) None of these.
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Page 12
Chapter 11: Cost Behavior, Operating Leverage, and Profitability Analysis
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Sample Questions
Q1) Select from the following the incorrect statement regarding contribution margin.
A) Sales - Fixed costs = Contribution margin
B) Net income + Total fixed costs = Contribution margin
C) At the breakeven point (where the company has neither profit nor loss), Total fixed costs = Total contribution margin
D) Total sales revenue times the contribution margin percentage = Total contribution margin
Q2) Which of the following items would not be found on a contribution format income statement?
A) Fixed cost
B) Variable cost
C) Gross margin
D) Net income
Q3) If a company is operating beyond its break-even point, sale of one more unit of product increases the company's profit by the amount of the unit contribution margin.
A)True
B)False
Q4) Activity base
Q5) Operating leverage
Page 13
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Chapter 12: Cost Accumulation, Tracing, and Allocation
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Sample Questions
Q1) Which of the following statements is incorrect?
A) A predetermined overhead rate may be used to allocate overhead costs when volume varies during the year.
B) A predetermined overhead rate is calculated using actual cost and volume data.
C) A predetermined overhead rate is calculated by dividing costs by volume, using a measure of volume such as direct labor hours or direct materials cost.
D) A company may need to allocate overhead costs to products to make pricing decisions for the products.
Q2) Each indirect cost should be allocated to products individually to provide the most useful cost information.
A)True
B)False
Q3) Which of the following costs generally can be traced directly to units of product?
A) Indirect materials
B) Overhead costs
C) Assembly labor
D) Indirect materials and assembly labor
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Chapter 13: Relevant Information for Special Decisions
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Sample Questions
Q1) Breezy Company is disposing of equipment that was originally purchased for $600,000 and has $240,000 of accumulated depreciation to date. The same equipment would cost $800,000 to replace. What is the total amount of sunk cost in this decision?
A) $240,000
B) $360,000
C) $840,000
D) $800,000
Q2) Select the correct statement regarding relevant revenues.
A) Relevant revenues must not differ between the alternatives being considered.
B) Past or future revenues may be relevant.
C) Relevant revenues must make a difference in the decision under consideration.
D) Revenues are not considered relevant in the same way as relevant costs.
Q3) A company that provides services (not goods) to its customers may incur costs that are appropriately classified as product-level costs.
A)True
B)False
Q4) Direct labor is an example of a product-level cost.
A)True
B)False
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Chapter 14: Planning for Profit and Cost Control
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Sample Questions
Q1) The capital budget does not affect any of a company's operating budgets.
A)True
B)False
Q2) Which of the following cash budget equations is incorrect?
A) Cash payments + cash receipts = cash requirements
B) Beginning cash + cash receipts = total cash available
C) Cash payments + cash cushion = total cash needed
D) Period one ending cash balance = period two beginning cash balance
Q3) What is the role of top management in a participative budgeting system?
A) Top management has no role - the budget is entirely developed by the lower-level employees.
B) Top management must always tighten employee-set budget standards to eliminate employees' attempts to build slack into the standards.
C) Top management must ensure that employee-generated objectives are consistent with those of the company.
D) All of the answers are correct.
Q4) Strategic planning deals with the establishment of long term company objectives.
A)True
B)False
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Chapter 15: Performance Evaluation
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Sample Questions
Q1) To avoid suboptimization, many companies prefer to evaluate their investment centers using:
A) Residual income instead of return on investment.
B) Return on investment instead of residual income.
C) Gross margin instead of contribution margin.
D) Sales instead of income.
Q2) Which of the following is an incorrect statement regarding variances?
A) A variance is favorable when expected sales are more than actual sales.
B) A variance is a difference between budgeted and actual amounts.
C) A variance can be calculated for both revenues and expenses.
D) A variance can be both favorable and unfavorable.
Q3) Which of the following statements about return on investment (ROI) is false?
A) ROI equals margin divided by investment turnover.
B) ROI is used to measure the performance of investment centers.
C) Seeking to maximize ROI can result in a conflict between the interest of a particular manager and the interest of the business as a whole.
D) Companies may minimize motivational problems by using original cost instead of book value in the denominator of the ROI formula.
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17
Chapter 16: Planning for Capital Investments
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Sample Questions
Q1) An annuity is a series of equal payments over equal time intervals that earn a constant rate of return.
A)True B)False
Q2) Generro Company is considering the purchase of equipment that would cost $36,000 and offer annual cash inflows of $10,500 over its useful life of 5 years. Assuming a desired rate of return of 12%, is the project acceptable?
A) No, since the negative net present value indicates the investment will yield a rate of return below the desired rate of return.
B) Yes, since the investment will generate $52,500 in future cash flows, which is greater than the purchase cost of $36,000.
C) Yes, since the positive net present value indicates the investment will earn a rate of return greater than 12%.
D) The answer cannot be determined.
Q3) The assumption regarding ordinary annuities is that cash flows occur at the end of each period.
A)True
B)False
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