Accounting Fundamentals
Exam Questions
Course Introduction
Accounting Fundamentals introduces students to the essential concepts and principles of accounting, covering the basics of financial record-keeping, the accounting cycle, and the preparation of financial statements. The course explores topics such as double-entry bookkeeping, accruals and deferrals, internal controls, and the interpretation of financial information for decision-making. Through practical exercises and real-world examples, students develop the foundational skills needed to record transactions, manage ledgers, and understand the role of accounting in business operations. This course is designed to provide a solid groundwork for more advanced study in accounting and finance.
Recommended Textbook
Financial Accounting 10th Edition by Walter T. Harrison
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Chapter 1: The Financial Statements
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Sample Questions
Q1) All of the following line items are found on the income statement EXCEPT for:
A)cost of goods sold.
B)interest expense.
C)operating expense.
D)dividends declared.
Answer: D
Q2) After preparing the Statement of Retained Earnings,the next statement to prepare is the:
A)Income Statement.
B)Statement of Dividends and Distributions.
C)Statement of Cash Flows.
D)Balance Sheet.
Answer: D
Q3) On a statement of cash flows,cash receipts are reported as:
A)positive amounts.
B)negative amounts.
C)in parentheses.
D)operating activities only.
Answer: A
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Chapter 2: Transaction Analysis
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Sample Questions
Q1) On May 10,a business collected $2,200 on account.What journal entry is needed on May 10?
A)Debit Accounts Payable for $2,200 and credit Accounts Receivable for $2,200.
B)Debit Accounts Receivable for $2,200 and credit Revenue for $2,200.
C)Debit Cash for $2,200 and credit Accounts Receivable for $2,200.
D)Debit Accounts Payable for $2,200 and credit Revenue for $2,200.
Answer: C
Q2) Posting is:
A)copying the information from the journal to the trial balance.
B)entering the data into the journal.
C)copying the information from the journal to the ledger.
D)copying the information from the ledger to the financial statements.
Answer: C
Q3) In transaction analysis,revenues and expenses that arise in different transactions are recorded in the ________ column of the accounting equation.
A)Cash
B)Common Stock
C)Dividends
D)Retained Earnings
Answer: D
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Chapter 3: Accrual Accounting Income
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Sample Questions
Q1) An adjusting journal entry contains a debit to an expense account and a credit to a contra account.This is an example of what type of adjusting entry?
A)Accrued revenue
B)Deferred revenue
C)Depreciation expense
D)Accrued expense
Answer: C
Q2) Liquidity measures how quickly an item can be converted into cash.
A)True
B)False Answer: True
Q3) The books need to be closed in order to prepare the accounts for the next period's transactions.
A)True
B)False Answer: True
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Chapter 4: Internal Control Cash
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Sample Questions
Q1) A bank statement included a NSF check from customer Kim Fields for $2,100.The journal entry to record this reconciling item should:
A)debit NSF and credit Cash for $2,100.
B)debit Cash and credit Accounts Receivable for $2,100.
C)debit Accounts Receivable and credit Cash for $2,100.
D)debit Cash and credit NSF for $2,100.
Q2) A budget is a financial plan that helps coordinate business activities. A)True B)False
Q3) The bookkeeper recorded a deposit of $100 as $10.On the bank reconciliation,this will be a(n):
A)addition of $90 to the balance per bank.
B)subtraction from the balance per bank.
C)addition of $90 to the balance per books.
D)subtraction of $90 to the balance per books.
Q4) When preparing a cash budget,a company must determine how much cash it will need in a future period.
A)True B)False
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Chapter 5: Short-Term Investments Receivables
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Sample Questions
Q1) An unrealized gain occurs when a company sells a trading security.
A)True
B)False
Q2) Investments in trading securities:
A)are reported after accounts receivable on the balance sheet.
B)are more liquid than cash.
C)are reported at historical cost on the balance sheet.
D)are reported at fair value on the balance sheet.
Q3) A company has net credit sales of $900,000,a beginning balance of net receivables of $70,000,and an ending balance of net receivables of $90,000.Its days' sales in receivables is:
A)28 days.
B)30 days.
C)32 days.
D)36 days.
Q4) Uncollectible-account expense is included in Cost of Goods Sold on the income statement.
A)True
B)False
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Chapter 6: Inventory Cost of Goods Sold
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Sample Questions
Q1) On June 1,Neighbor Company purchased inventory on account with a cost of $5,000.The credit terms were 2/10,net 30.On June 2,Neighbor Company returned 50 percent of the inventory.Neighbor Company uses the perpetual inventory system.On June 8,Neighbor Company paid for the inventory.What journal entry did Neighbor Company prepare on June 8?
A)debit Purchase Discount for $50,debit Cash for $2,450 and credit Accounts Payable for $2,500
B)debit Accounts Payable for $2,500 and credit Cash for $2,500
C)debit Accounts Payable for $2,500,credit Purchase Discount for $50 and credit Cash for $2,450
D)debit Accounts Payable for $2,500,credit Inventory for $50 and credit Cash for $2,450
Q2) A periodic inventory system:
A)is used for inexpensive goods.
B)is not expensive to maintain.
C)does not keep a running record of inventory on hand.
D)is all of the above.
Q3) The inventory turnover ratio should be the same for all types of industries.
A)True
B)False
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Chapter 7: Plant Assets,natural Resources, Intangibles
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Sample Questions
Q1) Gains on the sale of equipment increase net income while losses on the sale of equipment decrease net income.
A)True
B)False
Q2) On January 4,2012,Mary's Cafe acquired equipment for $200,000.The estimated life of the equipment is 8 years or 60,000 hours.The estimated residual value is $10,000.What is the balance in the Accumulated Depreciation account at December 31,2013 if the straight-line method is used?
A)$10,000
B)$25,000
C)$47,500
D)$50,000
Q3) Major Company purchased a piece of equipment.All of the following costs should be included in the cost of the equipment EXCEPT for:
A)insurance while in transit.
B)wages of workers who test the equipment before it is placed in service.
C)employee training costs before the equipment is placed in service.
D)insurance costs after the equipment is up and running.
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Chapter 8: Long-Term Investments: The Time Value of Money
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Sample Questions
Q1) On January 1,2015,Centre Company purchases $100,000,6% bonds at a price of 95 and a maturity date of January 1,2025.Centre Company intends to hold the bonds until the maturity date.Interest is paid semiannually,on January 1 and July 1.Centre Company has a calendar year end.The journal entry on January 1,2016 is:
A)debit Cash $6,000 and credit Interest Revenue $6,000.
B)debit Cash $6,000 and credit Interest Receivable $6,000.
C)debit Cash $3,000 and credit Interest Revenue $3,000.
D)debit Cash $3,000 and credit Interest Receivable $3,000.
Q2) The term time value of money refers to the fact that money earns interest over time.
A)True
B)False
Q3) If $100,000 face value bonds are issued at 103,the bonds are selling for $103,000. A)True B)False
Q4) The principal of a note payable is the amount borrowed. A)True B)False
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Chapter 9: Liabilities
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Sample Questions
Q1) The financing option that has the lowest risk to a company is financing by:
A)retained earnings.
B)issuing stock.
C)issuing bonds payable.
D)issuing notes payable.
Q2) The account Premium on Bonds Payable increases the issuer's liabilities.
A)True
B)False
Q3) Hoover Company has a note payable for $300,000 on January 31,2014.Starting on February 1,2014,the company is required to pay $75,000 on the note each month.The first payment is on February 1,2014,the second payment is on March 1,2014,the third payment is on April 1,2014 and the final payment is on May 1,2014.How will this note be reported on the balance sheet at January 31,2014?
A)Long-term liability,$300,000
B)Long-term liability,$225,000
C)Current liability,$75,000; long-term liability,$225,000
D)Current liability,$300,000
Q4) Purchasing merchandise inventory on account results in an accounts receivable. A)True B)False
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) A credit balance in Retained Earnings indicates that a company's lifetime earnings exceeded its lifetime losses and dividends declared.
A)True
B)False
Q2) A company can sell common stock in exchange for assets other than cash.
A)True
B)False
Q3) The date when a cash dividend becomes a legal obligation is the:
A)date of record.
B)declaration date.
C)last day of the fiscal year.
D)payment date.
Q4) The Statement of Stockholders' Equity does NOT have a separate column for:
A)Retained Earnings.
B)Accumulated Other Comprehensive Income.
C)Treasury Stock.
D)Equity-Method Investment.
Q5) A corporation is not an entity that is separate from its owners.
A)True
B)False
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Sample Questions
Q1) Which of the following line items are reported net of tax on the income statement?
A)operating loss of discontinued operations
B)loss on sale of discontinued segment
C)extraordinary loss due to flood damage in factory in Phoenix,Arizona
D)all of the above
Q2) The loss from discontinued operations includes:
A)operating loss of discontinued segment during divestiture period.
B)loss on sale of discontinued segment.
C)unusual and infrequent losses.
D)A and B.
Q3) Hedging enables an entity to protect itself from losing money in a foreign transaction by engaging in a counterbalancing transaction.
A)True
B)False
Q4) The audit report written by the outside auditors evaluates a company's:
A)financial statements only.
B)internal controls over financial reporting only.
C)management skills.
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D)financial statements and internal controls over financial reporting.
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Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) On a statement of cash flows prepared with the indirect method,adjustments to reconcile net income to net cash provided by operating activities do NOT include:
A)gain on Sale of Equipment.
B)Patent Amortization Expense.
C)Depletion Expense.
D)changes in all the current assets.
Q2) Which statement about the statement of cash flows is FALSE?
A)The statement of cash flows is based on information from several financial statements.
B)The statement of cash flows is based on information in a company's balance sheet only.
C)The change in the Cash account on the comparative balance sheets is the check figure for the statement of cash flows.
D)The indirect method of preparing the statement of cash flows is used by most companies in the United States.
Q3) An example of a cash equivalent is a money-market account.
A)True
B)False
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) If a company has sales of $250 in 2015 and $225 in 2016,the percentage decrease from 2015 to 2016 is 10%.
A)True
B)False
Q2) In the statement of cash flows,purchases of fixed assets are considered to be investing activities.
A)True
B)False
Q3) The cost of capital for a start-up company:
A)is lower for a start-up company since it is untested.
B)depends only on the market rate of interest.
C)depends only on the state of the economy.
D)is higher for a start-up company because it is more risky than an established company.
Q4) The ratio of the dollar amount of each individual asset to the dollar amount of total assets is an example of vertical analysis.
A)True
B)False
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