Accounting Fundamentals
Exam Materials
Course Introduction
Accounting Fundamentals introduces students to the essential principles and practices of accounting, covering the foundational concepts necessary to understand and manage financial information. The course explores topics such as the accounting cycle, double-entry bookkeeping, preparation and interpretation of financial statements, and the use of generally accepted accounting principles (GAAP). Through practical exercises and real-world examples, students develop the skills to record, classify, and analyze financial transactions, laying the groundwork for further study in accounting and related business disciplines.
Recommended Textbook
Financial Accounting 15th Edition by Carl Warren
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17 Chapters
3465 Verified Questions
3465 Flashcards
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Page 2
Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) Earning revenue
A)increases assets, increases owner's equity
B)increases assets, decreases owner's equity
C)increases one asset, decreases another asset
D)decreases assets, increases liabilities
Answer: A
Q2) Which of the following is most likely to obtain large amounts of resources by issuing stock?
A)partnership
B)corporation
C)proprietorship
D)government entity
Answer: B
Q3) Cash withdrawals by owners decrease assets and increase equity.
A)True
B)False
Answer: False
Q4) Prepare a statement of owner's equity for Thompson Computer Services for the current year ended March 31.
Answer: 11ea8d32_2887_a1ba_b445_a3977ee100a1_TB6239_00
Page 3
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Chapter 2: Analyzing Transactions
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Sample Questions
Q1) The cash account will always be debited.
A)True
B)False Answer: False
Q2) The erroneous arrangement of digits,such as writing $45 as $54,is called a slide.
A)True
B)False Answer: False
Q3) Journalizing always eliminates fraudulent activity.
A)True
B)False
Answer: False
Q4) A client has a massage and asks the company bookkeeper to mail her the bill.The bookkeeper should make which entry to record the invoice?
A)no entry until the cash is received
B)Fees Earned, debit; Accounts Receivable, credit
C)Cash, debit; Fees Earned, credit
D)Accounts Receivable, debit; Fees Earned, credit Answer: D
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) The revenue recognition principle
A)is not in conflict with the cash method of accounting
B)determines when revenue is credited to a revenue account
C)states that revenue is not recorded until the cash is received
D)controls all revenue reporting for the cash basis of accounting
Answer: B
Q2) For the year ending December 31,Beard Clinical Supplies Co.mistakenly omitted adjusting entries for
(1)$9,800 of unearned revenue that was earned, (2)earned revenue that was not billed of $10,200,and (3)accrued wages of $7,000.Indicate the combined effect of the errors on (a)revenues, (b)expenses,and (c)net income.
Answer: (a) Revenues were understated by $20,000 ($9,800 + $10,200).
(b) Expenses were understated by $7,000.
(c) Net income was understated by $13,000 ($20,000 $7,000).
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) The end-of-period spreadsheet
A)is an integral part of the accounting cycle
B)eliminates the need to rewrite the financial statements
C)is a working paper that is required
D)is used to summarize account balances and adjustments for the financial statements
Q2) Financial statements should be prepared before the closing entries are journalized and posted.
A)True
B)False
Q3) Accounts reported on the balance sheet that are carried forward from year to year are known as permanent accounts.
A)True
B)False
Q4) Use the adjusted trial balance for Stockton Company.Determine the total assets.
A)$8,630
B)$23,030
C)$21,930
D)$9,330
Q5) Describe a classified balance sheet.
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Chapter 5: Accounting Systems
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Sample Questions
Q1) Record payment received from customer
A)Purchases journal
B)Revenue journal
C)Cash receipts journal
D)Cash payments journal
E)Accounts receivable subsidiary ledger
F)Accounts payable subsidiary ledger
G)General journal
Q2) The term B2C refers to transactions conducted between two companies.
A)True
B)False
Q3) Business may be segmented by all of the following except A)region
B)product line
C)customer type
D)time period
Q4) Accounting systems evolve through a three-step process: analysis,design,and feedback.
A)True
B)False
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Chapter 6: Accounting for Merchandising Businesses
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Sample Questions
Q1) Kaden Co.sells merchandise on credit to Jase Co.for $9,600.The invoice is dated July 15 with terms of 1/15,net 45.If Jase Co.chooses not to take the discount,by when should the payment be made?
A)July 30
B)August 29
C)August 15
D)July 25
Q2) If merchandise costing $3,500,terms FOB destination,2/10,n/30,with prepaid freight costs of $125,is paid within 10 days,the amount of the purchases discount is $70.
A)True
B)False
Q3) A sales discount encourages customers to pay accounts more quickly than if a discount were not available.
A)True
B)False
Q4) The cost of merchandise inventory is limited to the purchase price less any purchase discounts.
A)True
B)False
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Chapter 7: Inventories
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Sample Questions
Q1) For the year ended December 31,Depot Max's cost of merchandise sold was $56,900.Inventory at the beginning of the year was $6,540.Ending inventory was $7,250.Depot Max's days' sales in inventory is closest to A)42
B)46
C)8
D)44
Q2) During the taking of its physical inventory on December 31,Almond Supplies Company incorrectly counted its inventory as $545,000 instead of the correct amount of $554,000.Indicate the effects of the misstatement on Almond Supplies Company's balance sheet and income statement for the year ended December 31.
Q3) The firm uses the periodic system,and there are 20 units of the commodity on hand at the end of the year.What is the amount of inventory at the end of the year according to the LIFO method?
A)$655
B)$620
C)$690
D)$659
Q4) List three different security measures taken to safeguard inventory.
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Chapter 8: Internal Control and Cash
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Sample Questions
Q1) "To maintain public confidence and trust in the financial reporting of companies" is the purpose of
A)the FASB
B)the IRS
C)Sarbanes-Oxley
D)GAAP
Q2) A voucher is a form on which is recorded pertinent data about a liability and the particulars of its payment.
A)True
B)False
Q3) In the normal operation of business,you receive a check from a customer and deposit it into your checking account.With your bank statement,you are advised that this check for $775 is "NSF." The bank also informs you that due to the amount of activity on your business account the monthly service charge is $75.During a bank reconciliation,you will
A)subtract both values from balance according to bank
B)add both values to balance according to books
C)add both values to balance according to bank
D)subtract both values from balance according to books
Q4) List the principal advantages of electronic funds transfers.
Page 10
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Chapter 9: Receivables
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Sample Questions
Q1) To record estimated uncollectible receivables using the allowance method,the adjusting entry would be a
A)debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts
B)debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts
C)debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable
D)debit to Loss on Credit Sales and a credit to Accounts Receivable
Q2) Jefferson uses the percent of sales method of estimating uncollectible expenses.Based on past history,2% of credit sales are expected to be uncollectible.Sales for the current year are $5,550,000.Which of the following is correct regarding the entry to record estimated uncollectible receivables?
A)Cash will be debited.
B)Bad Debt Expense will be credited.
C)Allowance for Doubtful Accounts will be credited.
D)Accounts Receivable will be debited.
Q3) This method focuses on the balance sheet.
A)Direct write-off method
B)Aging of receivables method
C)Percent of sales method
D)Allowance method
Q4) List at least three indicators that a receivable may be uncollectible.
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Chapter 10: Long-Term Assets: Fixed and Intangible
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Sample Questions
Q1) Exterior and interior painting
A)Ordinary maintenance and repairs
B)Asset improvements
C)Extraordinary repairs
Q2) The journal entry for recording payment for the short-term lease of a fixed asset would
A)be a memo entry only
B)debit the fixed asset and credit Cash
C)debit Rent Expense and credit Cash
D)debit a liability and credit Cash
Q3) Bacon Company acquired new machinery with a price of $15,200 by trading in similar old machinery and paying $12,700.The old machinery originally cost $9,000 and had accumulated depreciation of $5,000.In recording this transaction,Bacon Company should record
A)the new machinery at $16,700
B)the new machinery at $12,700
C)a gain of $1,500
D)a loss of $1,500
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12
Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) Baker Green's weekly gross earnings for the week ending December 7 were $2,500,and her federal income tax withholding was $525.Prior to this week Green had earned $98,000 for the year.Assuming the social security rate is 6.0% and Medicare is 1.5%,what is Green's net pay?
Q2) Davis and Thompson have earnings of $850 each.The social security tax rate is 6.0%,and the Medicare tax rate is 1.5%.Assuming that the payroll will be paid on December 29,what will be the employer's total FICA tax for this payroll period?
A)$102.00
B)$127.50
C)$96.00
D)$25.50
Q3) The payroll register is a multicolumn form used to assemble the payroll-related data for all employees.
A)True
B)False
Q4) Form W-2 is called the Wage and Tax Statement.
A)True
B)False
Q5) List five internal controls that relate directly to payroll.
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Chapter 12: Accounting for Partnerships and Limited Liability Companies
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Sample Questions
Q1) A limited liability company is a business entity form designed to overcome some of the disadvantages of the partnership form.
A)True
B)False
Q2) A voluntary association of two or more persons who co-own a business for profit
A)Partnership
B)Partnership agreement
C)Distribution of remaining cash to partners
D)Mutual agency
E)Equally
F)Death of a partner
G)Liquidation
H)Unlimited liability
Q3) Malcolm has a capital balance of $90,000 after adjusting to fair market value.Celeste contributes $45,000 to receive a 25% interest in a new partnership with Malcolm.Determine the amount and recipient of the partner bonus.
Q4) A partnership is a legal entity separate from its owners.
A)True
B)False
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Chapter 13: Corporations: Organization, stock Transactions, and Dividends
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Sample Questions
Q1) The day of the event that creates a liability to company
A)Cash dividend
B)Date of record
C)Stock Dividends Distributable
D)Date of declaration
E)Treasury stock
F)Preferred stock
G)Date of payment
H)Paid-In Capital in Excess of Par
Q2) The account used to record the difference when issue price exceeds par value of stock
A)Authorized shares
B)Issued shares
C)Outstanding shares
D)Par value
E)Common stock
F)Preferred stock
G)Paid-In Capital in Excess of Par
H)Transfer agent
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Chapter 14: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) Hayden Corporation issues 1,000,10-year,8%,$2,000 bonds dated January 1 at 92.The journal entry to record the issuance will show a
A)credit to Discount on Bonds Payable for $160,000
B)debit to Cash for $2,000,000
C)credit to Bonds Payable for $2,000,000
D)credit to Cash for $1,840,000
Q2) When a corporation issues bonds,it executes a contract with the bondholders,known as a bond debenture.
A)True
B)False
Q3) If $500,000 of 10-year bonds with interest payable semiannually are sold for $494,040 based on (1)the present value of $500,000 due in 20 periods at 5% plus (2)the present value of twenty $25,000 payments at 5%,the nominal or contract rate and the market rate of interest for the bonds are both 10%.
A)True
B)False
Q4) (a) Prepare the journal entry to issue $100,000 bonds that sold for $94,000. (b) Prepare the journal entry to issue $100,000 bonds that sold for $104,000.
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Chapter 15: Investments and Fair Value Accounting
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Sample Questions
Q1) Companies may report comprehensive income on each of the following statements except
A)the income statement
B)a separate statement of comprehensive income
C)the statement of cash flows
D)the retained earnings statement
Q2) The company whose stock is purchased by another entity
A)Debt securities
B)Equity securities
C)Investor
D)Investee
E)Cost method
F)Trading securities
G)Available-for-sale securities
H)Held-to-maturity securities
I)Equity method
J)Business combination
Q3) Albright Company purchased as a long-term investment $500,000 of Benton Corporation 10-year,9% bonds.Present entries to record the following selected transactions:
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Chapter 16: Statement of Cash Flows
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Sample Questions
Q1) Sale of machinery held for use by the company
A)Operating activities
B)Financing activities
C)Investing activities
D)Schedule of noncash financing and investing
Q2) Acquisition of treasury stock
A)Increase cash from operating activities
B)Decrease cash from operating activities
C)Increase cash from investing activities
D)Decrease cash from investing activities
E)Increase cash from financing activities
F)Decrease cash from financing activities
G)Noncash investing and financing supplement
Q3) The statement of cash flows is not one of the basic financial statements.
A)True
B)False
Q4) The statement of cash flows is an optional financial statement.
A)True
B)False
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Chapter 17: Financial Statement Analysis
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Sample Questions
Q1) On a common-sized balance sheet,100% is
A)total property, plant, and equipment
B)total current assets
C)total liabilities
D)total assets
Q2) A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability.The amount of working capital immediately after payment is
A)$845,000
B)$595,000
C)$720,000
D)$125,000
Q3) The report on internal control required by the Sarbanes-Oxley Act of 2002 may be prepared by either management or the company's auditors.
A)True
B)False
Q4) The excess of current assets over current liabilities is referred to as working capital. A)True
B)False
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