Accounting for Non-Majors Final Test Solutions
Course Introduction
Accounting for Non-Majors introduces the foundational principles and practices of accounting, emphasizing their application in real-world business settings. Designed for students from diverse academic backgrounds, the course covers essential topics such as financial statements, basic bookkeeping, budgeting, and the interpretation of financial information. Students will develop a practical understanding of how accounting impacts decision-making in organizations, fostering financial literacy skills crucial for personal and professional success. No prior accounting experience is required, making this an ideal starting point for those seeking to enhance their business acumen.
Recommended Textbook
Horngrens Financial and Managerial Accounting 6th Edition by Tracie L. Nobles
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Chapter 1: Accounting and the Business Environment
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Sample Questions
Q1) Lisa Smith decided to start her CPA practice as a professional corporation,Smith CPA,PC.The corporation purchased an office building for $35,000.The real estate agent said the building was worth $50,000 in the current market.The corporation recorded the building as a $50,000 asset because Lisa believes that is the real value of the building.Which of the following concepts or principles of accounting is being violated?
A)cost principle
B)economic entity assumption
C)monetary unit assumption
D)going concern assumption
Answer: A
Q2) Auditor
A)Performs reviews of companies to ensure compliance to rules and regulations
B)Compiles financial statements, interacts with auditors, oversees regulatory reporting
C)Specializes in accounting and financial management knowledge
D)Serves the general public
Answer: A
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3
Chapter 2: Recording Business Transactions
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Sample Questions
Q1) ________ represents a debt owed for renting a building.
A)Prepaid Rent
B)Rent Payable
C)Rent Revenue
D)Rent Expense
Answer: B
Q2) Which of the following accounts decreases with a debit?
A)Accounts Receivable
B)Notes Payable
C)Cash
D)Rent Expense
Answer: B
Q3) A business borrows cash by signing a note payable.Which of the following accounts is credited?
A)Notes Payable
B)Accounts Payable
C)Notes Receivable
D)Cash
Answer: A
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) If a company fails to make an adjusting entry for accrued revenues,the net income will be overstated.
A)True
B)False
Answer: False
Q2) The accountant for Barnes Auto Repair,Inc.failed to make an adjusting entry to record $5,000 of unpaid salaries for the last two weeks of the year.Which of the following is an effect of this omission?
A)The net income will be overstated.
B)The total assets will be understated.
C)The net income will be understated.
D)The total assets will be overstated.
Answer: A
Q3) If a company fails to make an adjusting entry for deferred expense,the assets will be overstated.Assume the deferred expense is initially recorded as an asset.
A)True
B)False
Answer: True
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5
Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Which of the following should NOT be considered when comparing the Adjusted Trial Balance to the Post-Closing Trial Balance to ensure that no errors were made in the closing process?
A)Account balances above Retained Earnings are the same.
B)The account balances on each of the trial balances are the same.
C)Account balances below Retained Earnings are zero.
D)The Retained Earnings account balance on the post-closing trial balance matches Retained Earnings on the balance sheet.
Q2) A balance sheet that lists the assets above the liabilities and stockholders' equity sections is a(n)________ balance sheet.
A)report form
B)unclassified form
C)account form
D)audited form
Q3) A business starts each new time period with a zero beginning balance in permanent accounts.
A)True
B)False
Q4) Why are temporary accounts not included in the post-closing trial balance?
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Chapter 5: Merchandising Operations
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Q1) In a perpetual inventory system,the physical count of inventory ________,
A)serves as a check of the perpetual records
B)captures transactions that are not recorded by the electronic system
C)establishes the correct amount of ending inventory for the financial statements
D)All statements are correct.
Q2) The Sales Revenue,Delivery Expense,and Sales Discounts Forfeited accounts will be closed via the ________ account.
A)Income Summary
B)Retained Earnings
C)Dividends
D)Stockholders' Equity
Q3) Which of the following is the correct order of subtotals that appear on a multi-step income statement?
A)Operating income,Gross profit,Net income
B)Gross profit,Net sales revenue,Net income
C)Net income,Operating income,Net income
D)Gross profit,Operating income,Net income
Q4) What does the gross profit percentage measure? How is it computed?
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Chapter 6: Merchandise Inventory
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Sample Questions
Q1) In a period of rising costs,the first-in,first-out (FIFO)method results in a lower cost of goods sold and a higher gross profit than the last-in,first-out (LIFO)method.
A)True
B)False
Q2) When a company uses the perpetual inventory method,which of the following would be the entry to adjust inventory to lower-of-cost-or-market?
A)debit Loss on Inventory and credit Merchandise Inventory
B)debit Merchandise Inventory and credit Inventory Adjustment
C)debit Cost of Goods Sold and credit Merchandise Inventory
D)debit Merchandise Inventory and credit Cost of Goods Sold
Q3) The disclosure principle states that a company should report enough information for outsiders to make knowledgeable decisions about the company.
A)True
B)False
Q4) When using the periodic inventory system and weighted-average inventory costing method,when is the weighted average cost per unit computed?
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Chapter 7: Internal Control and Cash
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Sample Questions
Q1) Baker Auto Supply purchases merchandise inventory from A & B Company.The accountant places the order,verifies receipt of the merchandise,and records the transaction in the general journal.
Q2) Which of the following statements describes an invoice from a supplier?
A)It is an order to purchase goods from a supplier.
B)It is a statement from the supplier showing the goods purchased and the amount due.
C)It is a report showing that the goods have been received in good condition,as ordered.
D)It is a document authorizing a payment to a supplier.
Q3) The use of computer firewalls is an essential element of good internal controls for e-commerce.
A)True
B)False
Q4) The Sarbanes-Oxley Act requires all private companies in the United States to maintain an internal control system.
A)True
B)False
Q5) Define internal control.
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9
Chapter 8: Receivables
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Sample Questions
Q1) A receivable is a liability because it represents a right to receive cash in the future.
A)True
B)False
Q2) On December 1,2018,Restaurant Equipment,Inc.sold machinery to a customer for $23,000.The customer could not pay at the time of sale but agreed to pay 9 months later and signed a 9-month note at 11% interest.What was the total amount of cash collected by Restaurant Equipment on the maturity of the note? (Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar. )
A)$25,530
B)$24,898
C)$21,103
D)$1,898
Q3) On January 1,Cooper Corp.accepted a one-year note for $5,000 at 4% from one of its customers.When the note matured on December 31,the customer was unable to pay,and the company treated it as a dishonored note.Prepare the journal entry that Cooper will make to record the dishonored note.Omit explanation.
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Page 10
Chapter 9: Plant Assets, natural Resources, and Intangibles
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Sample Questions
Q1) When a business sells a plant asset for book value,a gain or loss should be recorded.
A)True
B)False
Q2) City Auto Parts recently traded in store fixtures.The exchange had commercial substance.The old fixtures had a cost of $48,000 and accumulated depreciation of $14,000.City paid $101,000 for the new store fixtures.These new fixtures had a market value of $117,000.There is a loss of $18,000 on this exchange.
A)True
B)False
Q3) Under U.S.GAAP,plant assets are reported at book value on the balance sheet. A)True
B)False
Q4) Plant assets are long-lived,tangible assets used in the operation of a business. A)True
B)False
Q5) The intellectual property of a business is easy to measure.
A)True
B)False
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Chapter 10: Investments
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Sample
Questions
Q1) Unrealized gains or losses on available-for-sale debt investments occur when a company adjusts the investment to ________.
A)fair value but has not yet disposed of the asset
B)fair value when an asset is disposed
C)average value but has not yet disposed of the asset
D)average value when an asset is disposed
Q2) Long-term investments include debt and equity securities that the investor expects to hold longer than one year or debt or equity securities that are not readily marketable.
A)True
B)False
Q3) The fair value of an investment is the price that ________.
A)existed at the time of acquisition
B)would be received if the company were to sell the investment on the market
C)is always equal to the weighted average cost of the investment
D)is not relevant for trading debt investments
Q4) An equity security does not represent an ownership interest in a corporation,although it pays dividends.
A)True
B)False
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Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) Dallas Corp.has gross pay for March of $50,000.The journal entry to record salaries expense would include a debit to Salaries and Wages Payable for $50,000.
A)True
B)False
Q2) Amounts owed for products or services purchased on account are called
A)accounts payable
B)unearned revenue
C)accrued expense
D)warranty payable
Q3) Alpine Enterprises estimates that it will pay a 5% bonus on annual net income after deducting the bonus.The company reports net income of $500,000 before the calculation of the bonus.Employee Bonus Expense will be debited for $25,000.
A)True
B)False
Q4) Benefits are extra compensation items that are not paid directly to an employee.
A)True
B)False
Q5) What is a contingent liability? Provide two examples of contingencies.
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Chapter 12: Long-Term Liabilities
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Sample Questions
Q1) Which of the following concepts represent the time value of money?
A)the concept that money becomes obsolete over time
B)the concept that money earns interest over time
C)the concept that money loses its purchasing power over time
D)the concept that money can be converted into other currencies over time
Q2) The Golden Company issues $539,000 of 7%,10-year bonds at 104 on March 31,2019.The bonds pay interest on March 31 and September 30.Assume that the company uses the straight-line method for amortization.The journal entry to record the issuance includes a ________.
A)debit to Cash for $539,000
B)credit to Bonds Payable for $560,560
C)debit to Premium on Bonds Payable for $21,560
D)debit to Cash for $560,560
Q3) Willson Glassware Company issues $1,014,000 of 10%,10-year bonds at 97 on February 28,2019.The bond pays interest on February 28 and August 31.On August 31,2019,how much cash did Willson pay to the bondholders?
A)$51,968
B)$50,700
C)$101,400
D)$49,432
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Chapter 13: Stockholders Equity
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Q1) Earnings per share for income from continuing operations must be reported on the face of the income statement.
A)True B)False
Q2) The rate of return on common stockholders' equity shows the relationship between net income available to common stockholders and their average common equity invested in the company.
A)True B)False
Q3) Income tax expense is added to arrive at income from continuing operations. A)True B)False
Q4) The purchase of treasury stock ________.
A)decreases assets and stockholders' equity
B)increases assets and stockholders' equity
C)increases assets and decreases stockholders' equity
D)decreases assets and increases stockholders' equity
Q5) A sale of treasury stock at its cost increases assets and increases equity. A)True B)False
Page 15
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Chapter 14: The Statement of Cash Flows
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Sample Questions
Q1) Under IFRS,interest revenue and dividend income may be reported either as an operating activity or an investing activity.
A)True
B)False
Q2) The three major categories included on the statement of cash flows are ________.
A)investing,operating,and financing activities
B)investing,capital,and financing activities
C)investing,operating,and contracting activities
D)financial,operating,and internal control activities
Q3) Buying property,plant,and equipment for cash is considered a cash outflow for the financing activities section of the statement of cash flows.
A)True
B)False
Q4) The statement of cash flows is dated the same as the balance sheet.
A)True
B)False
Q5) List (in the correct order)and briefly discuss the five steps that are followed when preparing the statement of cash flows by the indirect method.
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) The times-interest-earned ratio measures the number of times earnings before interest and taxes can cover interest expense.
A)True
B)False
Q2) Unexpected or inconsistent movements among sales,merchandise inventory,and receivables reflect normal market conditions and do not pose red flags in financial statements.
A)True
B)False
Q3) If inventory turnover is too slow,a company may be unable to sell goods or it may be understating merchandise inventory.
A)True
B)False
Q4) To accurately determine the financial performance of a company,it is necessary to compare the company's performance ________.
A)with a competing company
B)to the budget
C)with companies in different industries
D)only with profitable companies
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Chapter 16: Introduction to Managerial Accounting
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Sample Questions
Q1) How does a service company calculate unit cost per service? Why do managers need to know the unit cost per service?
Q2) Managerial accounting is used in manufacturing and merchandising companies,but not in service companies.
A)True
B)False
Q3) An accounting field that helps managers plan and control operations.
A)Controlling
B)Managerial accounting
C)Organizational chart
D)Planning
E)Line position
F)Financial accounting
G)Directing
Q4) In a manufacturing company,wages and benefits of assembly line workers are included in manufacturing overhead.
A)True
B)False
Q5) Describe the flow of product costs for a manufacturer.
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Chapter 17: Job Order Costing
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Sample Questions
Q1) Groot Promotional Services uses a job order system for costing and billing promotional services for dance and ballet performances.Groot has four public relations specialists plus an office staff.At the beginning of the year,Groot estimated the total cost of salaries and benefits for the public relations specialists at $684,000 and a total of 7200 billable hours for the year.All remaining office and administrative costs were estimated at $432,000.The allocation base for office and administrative costs is billable hours.In June,Groot signed a contract for a Russian ballet performance.It estimated the new contract would require 36 hours of specialist time.What is the total cost estimate for this contract?
A)$2160
B)$5580
C)$3420
D)$1260
Q2) Both job order and process costing systems use a four-step method to track product costs.List each of the four steps.
Q3) On June 30,Cleopatra,Inc.finished Job 70 with total job costs of $40,000 and transferred the costs to Finished Goods Inventory.On July 6,Cleopatra completed the sale of the goods to a customer for $55,000 on account.Provide the journal entry to record the sales revenue.Omit explanation.
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Chapter 18: Process Costing
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Sample Questions
Q1) A characteristic of products that are produced in a series of steps or processes is that
A)their costs are accumulated on a job cost record.
B)they are homogeneous and made in large quantities.
C)their costs are transferred to Finished Goods Inventory as jobs are completed.
D)their costs are accounted for in one Work-in-Process Inventory account.
Q2) Under process costing,the unit cost of the completed units is less than the unit cost of the incomplete units.
A)True
B)False
Q3) In a process costing system,
A)separate work-in-process inventory accounts are maintained for each process or department.
B)work-in-process inventory employs one general ledger account with a subsidiary ledger.
C)a job cost record is maintained for each job.
D)costs are transferred when jobs are complete.
Q4) List five ways in which managers use a production cost report to make decisions for their companies.
Q5) How is a production cost report prepared using the FIFO method?
Page 20
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Chapter 19: Cost Management Systems:
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Sample Questions
Q1) Why is using a single plantwide predetermined overhead allocation rate not always accurate?
Q2) Why is it difficult to measure external failure costs? What are some nonfinancial measures quality management systems can use to gauge external failure?
Q3) Nguyen,Inc.has received a bid for 15,000 units.The costing estimates show that the average cost per unit for this bid will be $500.The company uses cost-based pricing and adds 20% markup to total costs.What total price will Nguyen ask for the entire order?
A)$9,000,000
B)$7,500,000
C)$1,500,000
D)$6,000,000
Q4) Activity-based costing uses a common allocation base for all activities.
A)True
B)False
Q5) Define target cost.How is target cost determined?
Q6) Quality management systems emphasize external failure costs.
A)True
B)False
Page 21
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Chapter 20: Cost-Volume-Profit Analysis
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Sample Questions
Q1) How is the contribution margin calculated?
Q2) The asymmetrical change in costs when there is a decrease in the volume of activity is called ________.
A)cost stickiness
B)contribution costs
C)curvilinear costs
D)cost adhering
Q3) CVP analysis assumes that the sales price per unit does not change as volume changes.
A)True
B)False
Q4) Ogawa Company incurs both fixed and variable production costs.Assuming that production is within the relevant range,if volume goes up by 28%,then the total fixed costs would ________.
A)increase by 28%
B)remain the same
C)increase by an amount less than 28%
D)decrease by 28%
Q5) What is the margin of safety? List three ways in which margin of safety can be expressed.
22
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Chapter 21: Variable Costing
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Q1) Which of the following is considered a period cost in absorption costing?
A)variable manufacturing overhead costs
B)fixed selling and administrative costs
C)fixed manufacturing overhead costs
D)semi-variable manufacturing overhead costs
Q2) Which of the following statements is true of variable costing?
A)It considers variable manufacturing overhead as period costs.
B)It considers fixed manufacturing overhead as product costs.
C)It considers variable selling and administrative costs as product costs.
D)It considers fixed selling and administrative costs as period costs.
Q3) Which of the following statements is true of absorption costing?
A)It considers variable selling and administrative costs as product costs.
B)It considers fixed selling and administrative costs as product costs.
C)It considers fixed manufacturing overhead cost as product costs.
D)It considers variable manufacturing overhead cost as period costs.
Q4) The contribution margin for service companies is calculated by subtracting fixed costs from service revenue.
A)True
B)False
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Chapter 22: Master Budgets
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Q1) All organizations use one standardized budgeting process.
A)True
B)False
Q2) When preparing the direct labor budget,________.
A)the production manager projects the average direct labor costs
B)direct labor hours needed for production are multiplied by the direct labor cost per hour
C)the actual direct labor cost per hour must be known
D)budgeted units to be produced are multiplied by direct labor cost per hour to determine budgeted direct labor cost
Q3) A manufacturing company has prepared the operating budget,the cash budget,and the budgeted income statement and is now preparing the budgeted balance sheet.The balance of Retained Earnings can be taken from the ________.
A)cost of goods sold budget
B)schedule of cash receipts
C)cash budget
D)balance sheet of the previous year and the budgeted income statement
Q4) What is a common method of accessing short-term financing?
Q5) For a merchandising company,what is the final step in the master budget process?
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Chapter 23: Flexible Budgets and Standard Cost Systems
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Q1) A favorable variance has a debit balance and is a contra revenue.
A)True
B)False
Q2) A standard cost system is an accounting system that uses standards for product costs.
A)True
B)False
Q3) The sales volume variance is a result of the difference between the actual sales price and the budgeted sales price.
A)True
B)False
Q4) List three ways in which using a standard cost system helps managers.
Q5) The difference between the actual allocation base (actual quantity)and the amount of the allocation base that should have been used (standard quantity)times the standard cost is called the ________.
A)variable overhead cost variance
B)variable overhead efficiency variance
C)fixed overhead cost variance
D)fixed overhead volume variance
Q6) What does the fixed overhead cost variance measure?
Page 25
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Chapter 24: Responsibility Accounting and Performance Evaluation
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Q1) Which of the following managers is likely to have the most diverse responsibilities?
A)the manager of a cost center
B)the manager of a profit center
C)the manager of an investment center
D)the manager of a revenue center
Q2) A cost center responsibility report ________.
A)includes depreciation expense
B)typically focuses on the flexible budget variance
C)is the same as a performance report
D)shows all costs incurred by the department
Q3) A kiosk that sells sunglasses at a local mall is an example of a(n)________.
A)responsibility center
B)cost center
C)investment center
D)revenue center
E)profit center
Q4) List and briefly discuss the two limitations of financial performance measures.
Q5) Discuss the difference between a centralized company and a decentralized company.
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Chapter 25: Short-Term Business Decisions
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Q1) Links Golf Course is planning for the coming golfing season.Investors would like to earn a 10% return on the company's $60,000,000 of assets.The company primarily incurs fixed costs to groom the greens and fairways.Fixed costs are projected to be $32,000,000 for the season.About 600,000 rounds of golf are expected to be played each year.Variable costs are about $15 per round of golf.Links Golf Course is a price-taker and will not be able to charge more than its competitors,who charge $75 per round of golf.Compute the operating profit that will be earned.
A)$4,000,000
B)$6,000,000
C)$86,000,000
D)$45,000,000
Q2) A company is a price-taker when ________.
A)it operates in a highly competitive market
B)its product is unique
C)it has considerable flexibility in setting prices of its products
D)it has very high fixed costs
Q3) The cost-plus pricing approach is emphasized by price-setters.
A)True
B)False
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Chapter 26: Capital Investment Decisions
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Q1) Capital rationing is a process adopted when a company has limited resources,and it must find ways to reduce operating expenses in all of its divisions and units.
A)True
B)False
Q2) When using the accounting rate of return,what is the rule for making the decision to make the investment?
Q3) Many service,merchandising,and manufacturing firms use discounted cash flow methods to make capital investment decisions.
A)True
B)False
Q4) An annuity is a series of unequal payments over equal intervals.
A)True
B)False
Q5) Which of the following is a capital budgeting method used to screen potential investments?
A)return on assets
B)acid test ratio
C)accounting rate of return
D)debt-to-equity ratio
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Chapter 27: Accounting Information Systems
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Q1) Prenumbered source documents provide necessary control in a system by automatically assigning a sequential number to each new transaction.
A)True
B)False
Q2) When using QuickBooks,the Vendors tab is used to record a bill that has been received.
A)True
B)False
Q3) Depreciation expense is recorded in a ________.
A)cash payments journal
B)sales journal
C)cash receipts journal
D)general journal
Q4) A CR.5 posting reference in a subsidiary ledger signifies that the ________.
A)posting is transferred from the cash receipts journal,page 5
B)transaction on page number 5 is credited
C)amount credited is after a 5% discount
D)sales on credit is expected to be paid within five days
Q5) List and describe two features of an effective accounting information system.
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Q6) Describe the transactions recorded in the cash payments journal.
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