Accounting for Non-Majors
Midterm Exam
Course Introduction
Accounting for Non-Majors introduces students to the fundamental principles and concepts of accounting, emphasizing the role of financial information in decision making for individuals and organizations. The course covers basic topics such as the accounting cycle, preparation and interpretation of financial statements, and the use of accounting information for planning and control. Designed for students from diverse academic backgrounds, it provides practical insights into how accounting affects everyday business operations and equips students with essential skills to analyze and understand financial data, even if they do not plan to pursue a career in accounting.
Recommended Textbook
Fundamental Financial Accounting Concepts 10th Edition by Thomas P Edmonds
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13 Chapters
1246 Verified Questions
1246 Flashcards
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Page 2
Chapter 1: An Introduction to Accounting
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Sample Questions
Q1) What is the amount of assets that will be reported on Packard's balance sheet at the end of Year 2?
A)$2,115
B)$440
C)$2,215
D)$395
Answer: A
Q2) Expenses are reported on which of the following financial statement(s)?
A)Income statement
B)Balance sheet
C)Statement of changes in stockholders' equity
D)Income statement and statement of changes in stockholders' equity
Answer: A
Q3) When a business provides services for cash,which elements of the accounting equation are affected?
A)Revenue and Expense
B)Cash and Revenue
C)Cash and Expense
D)Cash and Dividends
Answer: B
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Chapter 2: Accounting for Accruals and Deferrals
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Sample Questions
Q1) Mize Company provided $45,500 of services on account,and collected $38,000 from customers during the year.The company also incurred $37,000 of expenses on account,and paid $32,400 against its payables.How do these events impact the elements of the financial statements model?
A)Total assets would increase.
B)Total liabilities would increase.
C)Total equity would increase.
D)All of these answer choices are correct.
Answer: D
Q2) Which of the following events would not require a year-end adjusting entry?
A)Purchasing supplies for cash during the year.
B)Paying for one year's rent during the year.
C)Providing services on account during the year.
D)Each of these events would require a year-end adjusting entry. Answer: C
Q3) Certified public accountants are obligated to act in a way that serves the public interest.
A)True
B)False Answer: True
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Chapter 3: The Double-Entry Accounting System
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Sample Questions
Q1) Which of the following is a true statement? (Note: A statement may be true even if it does not identify all accounts that appear on that particular financial statement. )
A)Account numbers 2,4,and 5 will appear on the income statement.
B)Account numbers 1,3,and 8 will appear on the balance sheet.
C)Account numbers 2,5,and 8 will appear on the statement of cash flows.
D)Account numbers 4,5,and 6 will appear on the statement of changes in stockholders' equity.
Answer: B
Q2) What is the company's return-on-assets ratio?
A)5%
B)10%
C)20%
D)50%
Answer: B
Q3) The T-account format is also called the chart of accounts.
A)True
B)False
Answer: False
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Chapter 4: Accounting for Merchandising Businesses
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Sample Questions
Q1) Butte Company recognized $24,000 of revenue on the cash sale of merchandise that cost $11,000.How will the sale be reported on the statement of cash flows?
A)Cash inflow from investing activities
B)Cash inflow from operating activities
C)Cash inflow from financing activities
D)Cash inflow from principal activities
Q2) Which accounts would appear on the income statement?
A)Account numbers 3,4,7,8,and 9
B)Account numbers 3,4,5,7,and 9
C)Account numbers 2,3,7,8,and 9
D)Account numbers 3,5,7,and 8
Q3) Which accounts would appear on the balance sheet?
A)Account numbers 1,2,4,and 5
B)Account numbers 1,3,7,and 8
C)Account numbers 1,2,and 6
D)Account numbers 3,4,8,and 9
Q4) Sales discounts affect net sales,but purchase discounts do not.
A)True
B)False
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Chapter 5: Accounting for Inventories
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Sample Questions
Q1) West Corporation's Year 1 ending inventory was overstated by $20,000;however,ending inventory for Year 2 was correct.Which of the following statements is correct?
A)Net income for Year 1 is understated.
B)Retained earnings at the end of Year 2 is overstated.
C)Cost of goods sold for Year 1 is overstated.
D)Cost of goods sold for Year 2 is overstated.
Q2) When prices are rising,which method of inventory,if any,will result in the lowest relative net cash outflow (including the effects of taxes,if any)?
A)LIFO
B)FIFO
C)Weighted average
D)None of these;the choice of inventory methods does not affect cash flows.
Q3) Warner Company purchased two units of a product for $36 and later purchased one more for $40.If the company uses the weighted average cost flow method,and it sold one unit of the product for $60,its gross margin would be $22.00.
A)True
B)False
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7
Chapter 6: Internal Control and Accounting for Cash
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Sample Questions
Q1) The Securities and Exchange Commission is authorized to establish and enforce the accounting rules for public companies.
A)True
B)False
Q2) Which of the following is not one of the nine features of an internal control system?
A)Establishment of clear lines of authority
B)Having employees covered by a fidelity bond
C)Requiring regular vacations for certain employees
D)Customer service comment cards
Q3) Which of the following is an internal control procedure used to safeguard a company's assets?
A)Depositing cash receipts in a bank on a timely basis
B)Segregation of duties
C)Preparing a bank reconciliation
D)All of these answer choices are correct
Q4) Preparing a bank reconciliation is a control activity.
A)True
B)False
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Chapter 7: Accounting for Receivables
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Sample Questions
Q1) The operating cycle is the average time that a company spends acquiring inventory to sell.
A)True
B)False
Q2) The collection of an account receivable is an asset source transaction.
A)True
B)False
Q3) Which of the following best describes the percent of receivables method?
A)Income statement approach
B)Direct write-off approach
C)Credit sales approach
D)Balance sheet approach
Q4) When is it acceptable to use the direct write-off method?
A)If the dollar amount of uncollectible accounts is not material.
B)If most uncollectible accounts do not occur in the period of sale.
C)If most sales are made to other businesses.
D)All of these answer choices are correct.
Q5) The direct write-off method overstates assets on the balance sheet.
A)True
B)False
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Chapter 8: Accounting for Long-Term Operational Assets
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Sample Questions
Q1) Pierce Corporation,a U.S.business,is a direct competitor of Zeiss Company,a German firm.The two firms not only compete for customers,but also for investment capital.In Year 1,each company spent about $35,000 U.S.dollars or the equivalent on research and development.U.S.GAAP requires the entire amount to be expensed,while Germany requires its businesses to record R&D expenditures as an asset and then to expense it over its useful life.Assuming the treatment of R&D is the only difference between the two firms,which of the following is correct?
A)Pierce will have higher total assets than Zeiss in Year 1.
B)Pierce will have a higher debt-to-assets ratio than Zeiss in Year 1.
C)Zeiss will have a lower net income for Year 1.
D)This difference in accounting principles does not affect the total amount of assets reported by the two companies.
Q2) Tangible assets include land,equipment,and goodwill.
A)True
B)False
Q3) Depletion of a natural resource is usually calculated using the straight-line basis. A)True
B)False
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Chapter 9: Accounting for Current Liabilities and Payroll
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Sample Questions
Q1) Vacation pay is considered a contingent liability.
A)True
B)False
Q2) On October 1,Year 1,Harrison Company borrowed money by issuing a $24,000 face value discount note to its bank.The note had an 8% discount rate and had a one-year term to maturity.On that date,Harrison recorded a Discount on Notes Payable in the amount of $1,920.
A)True
B)False
Q3) Greer Company pays Jamal Perry a salary of $3,000 per week.How much FICA tax must Greer pay with regards to this employee (including both the employee and employer portions)? (Assume a Social Security rate of 6 percent on the first $110,000 of income and a Medicare rate of 1.5 percent on all earnings. )
A)$225
B)$360
C)$-0-
D)$450
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Chapter 10: Accounting for Long-Term Debt
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Sample Questions
Q1) Which of the following statements is true regarding the straight-line method of amortizing discounts and premiums on bonds?
A)It assigns variable amounts of interest over the term of the liability.
B)It uses compound interest principles.
C)It assigns the same amount of interest to each interest period over the life of the bond.
D)It accurately reports the amount of interest expense incurred during each interest period.
Q2) What is the interest expense for Year 1 and Year 2,respectively? (Round your final answers to the nearest dollar. )
A)$3,200 and $14,000
B)$16,000 and $16,350
C)$16,000 and $13,273
D)$20,625 and $16,000
Q3) If bonds are issued at a premium,the bond issuer will pay the bondholders an amount lower than the issue price at maturity.
A)True
B)False
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Chapter 11: Proprietorships,partnerships,and Corporations
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Sample Questions
Q1) Van Buren Corporation issued 5,000 shares of $6 par common stock for $24 per share.For this transaction,Common Stock should be credited (increased)for $120,000.
A)True
B)False
Q2) Which of the following statements about why companies choose not to pay cash dividends is (are)true?
A)The board and management prefer to reinvest all net income for future growth.
B)The corporation does not have sufficient cash.
C)The corporation does not have sufficient retained earnings.
D)All of these statements are true.
Q3) Which of the following is a contra equity account?
A)Retained Earnings
B)Paid-in Capital in Excess of Par Value
C)Treasury Stock
D)Appropriated Retained Earnings
Q4) A corporation is a legal entity created by the authority of a state government,separate and distinct from its owners.
A)True
B)False
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Chapter 12: Statement of Cash Flows
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Sample Questions
Q1) In preparing the statement of cash flows by the indirect method,increases in noncash current assets are subtracted from net income.
A)True
B)False
Q2) Statler Corporation has beginning and ending accounts payable balances of $400 and $800,respectively.Inventory had beginning and ending balances of $700 and $600,respectively.If cost of goods sold was $2,800,how much cash was spent to purchase inventory?
A)$2,100
B)$2,500
C)$2,700
D)None of these answer choices is correct
Q3) Which method of reporting cash flows from operating activities is used by most businesses in preparing the statement of cash flows?
A)Accrual method
B)Direct method
C)Indirect method
D)Computational method
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14
Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Short-term creditors are usually most interested in assessing:
A)Liquidity.
B)Solvency.
C)Managerial effectiveness.
D)Profitability.
Q2) As of December 31,Year 1,Gant Corporation had a current ratio of 1.29,quick ratio of 1.05,and working capital of $18,000.The company uses a perpetual inventory system and sells merchandise for more than it cost.On January 1,Year 2,Gant collected $5,200 of accounts receivable.As a result of this transaction,Gant's working capital will:
A)Increase.
B)Decrease.
C)Remain the same.
D)Cannot be determined.
Q3) The drawback of studying absolute amounts reported in financial statements is the problem of differing materiality levels.
A)True
B)False
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