Accounting Fundamentals
Exam Solutions
Course Introduction
Accounting Fundamentals introduces students to the basic principles and practices of financial accounting, including the accounting cycle, preparation of financial statements, and the foundational concepts of assets, liabilities, equity, revenue, and expenses. Through practical examples and exercises, students learn how to record transactions, adjust entries, and interpret financial information to support sound business decision-making. This course lays the groundwork for further study in accounting and equips learners with the essential skills necessary for understanding and analyzing financial data in any business environment.
Recommended Textbook
Financial Accounting 9th Edition by Walter T. Harrison
Available Study Resources on Quizplus
13 Chapters
2240 Verified Questions
2240 Flashcards
Source URL: https://quizplus.com/study-set/3596
Page 2
Chapter 1: The Financial Statements
Available Study Resources on Quizplus for this Chatper
174 Verified Questions
174 Flashcards
Source URL: https://quizplus.com/quiz/71392
Sample Questions
Q1) Which of the following is a correct statement about long-term assets?
A) Accumulated depreciation increases the cost of property, plant, and equipment on the balance sheet.
B) Intangibles are long-term assets with no physical form.
C) Long-term investments can never be sold by the company.
D) Other long-term assets include accumulated depreciation.
Answer: B
Q2) On the income statement:
A) the top line is net income.
B) all expenses must have the word "expenses" in their title.
C) gains and liabilities are reported.
D) amounts can be reported in millions of dollars to reduce clutter.
Answer: D
Q3) Examples of liabilities include:
A) accounts payable and accounts receivable.
B) accounts payable and land.
C) investments and owners' equity.
D) accounts payable and long-term debt.
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Transaction Analysis
Available Study Resources on Quizplus for this Chatper
179 Verified Questions
179 Flashcards
Source URL: https://quizplus.com/quiz/71387
Sample Questions
Q1) Revenues and expenses are specialized stockholders' equity accounts, all having debit balances.
A)True
B)False
Answer: False
Q2) An important rule to remember when analyzing the impact of business transactions on accounts is:
A) net income increases stockholders' equity.
B) if expenses exceed revenues, the company will have a net income.
C) a net loss does not affect stockholders' equity.
D) stockholders' equity includes the two categories of income statement accounts, revenues and liabilities.
Answer: A
Q3) When computing the normal balance of an account:
A) salaries expense should have a credit balance.
B) accounts payable should have a credit balance.
C) equipment can have either a credit or debit balance.
D) notes payable can have either a credit or debit balance.
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Accrual Accounting Income
Available Study Resources on Quizplus for this Chatper
205 Verified Questions
205 Flashcards
Source URL: https://quizplus.com/quiz/71386
Sample Questions
Q1) Companies are required to record accrued expenses on a daily or weekly basis.
A)True
B)False
Answer: False
Q2) An adjustment for which the business paid or received cash in advance is:
A) an accrual.
B) a deferral.
C) earned revenue.
D) expense recognition.
Answer: B
Q3) The Dividends account is a permanent account.
A)True
B)False
Answer: False
Q4) In the preparation of the adjusted trial balance:
A) the trial balance data comes from the journal.
B) four columns are needed for the adjustments.
C) the adjusted trial balance columns give the final account balances.
D) the debits to not have to equal the credits.
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Internal Control Cash
Available Study Resources on Quizplus for this Chatper
173 Verified Questions
173 Flashcards
Source URL: https://quizplus.com/quiz/71385
Sample Questions
Q1) The bank reconciliation can be used to control cash.
A)True
B)False
Q2) A company has a policy that all checks over $5,000 need to have the signature of the owner in addition to the signature of the bookkeeper. This is an example of:
A) limited access.
B) proper approvals.
C) adequate records.
D) encryption.
Q3) A cash budget does all of the following EXCEPT:
A) helps coordinate business activities.
B) controls operations.
C) determines if the company will need to borrow money.
D) helps a company manage cash by planning receipts and payments.
Q4) Most petty cash funds use an imprest system.
A)True
B)False
Q5) Explain why separation of duties is such an important procedure for safeguarding assets. Provide two examples of this control procedure.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Short-Term Investments Receivables
Available Study Resources on Quizplus for this Chatper
201 Verified Questions
201 Flashcards
Source URL: https://quizplus.com/quiz/71384
Sample Questions
Q1) Johnson Corporation purchases $620,000 of PM Corporation stock on October 18, 2012. Johnson classifies this investment as a trading security. On December 31, 2012, Johnson Corporation's investment in PM Corporation has a fair value of $610,000. Prepare the necessary journal entries.
Q2) Which account shows the amount of accounts receivable that the business does NOT expect to collect?
A) Sales Returns and Allowances
B) Unearned Accounts Receivable
C) Allowance for Uncollectible Accounts
D) Uncollectible Accounts Expense
Q3) The entry to write off an account under the allowance method for estimating uncollectible accounts:
A) reduces total assets.
B) reduces net income.
C) has no effect on total assets or net income.
D) increases net income.
Q4) Selling on credit creates both a benefit and a cost.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Inventory Cost of Goods Sold
Available Study Resources on Quizplus for this Chatper
187 Verified Questions
187 Flashcards
Source URL: https://quizplus.com/quiz/71383
Sample Questions
Q1) A purchase allowance increases the cost of the inventory.
A)True
B)False
Q2) A company can use the cost-of-goods-sold model to determine how much inventory to purchase.
A)True
B)False
Q3) The inventory cost under the average cost per unit method will generally fall in between the inventory cost using the LIFO and FIFO methods.
A)True
B)False
Q4) The use of the FIFO method generally increases taxable income:
A) when prices are constant.
B) when prices are declining.
C) when prices are increasing. D) under all circumstances.
Q5) Service entities will have both a cost of goods sold and an inventory account. A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Plant Assets, Natural Resources, Intangibles
Available Study Resources on Quizplus for this Chatper
211 Verified Questions
211 Flashcards
Source URL: https://quizplus.com/quiz/71382
Sample Questions
Q1) Depreciation expense:
A) allocates a portion of the cost of an asset against the revenue the asset helps earn each period.
B) is not required for plant assets according to GAAP.
C) is reported on the balance sheet.
D) is required for land according to GAAP.
Q2) The journal entry to record depreciation expense is:
A) debit depreciation expense, credit the asset account.
B) debit accumulated depreciation, credit the asset account.
C) debit the asset account, credit accumulated depreciation.
D) debit depreciation expense, credit accumulated depreciation.
Q3) On January 2, 2012, Heidi's Pet Boutique purchased a $5,000 television for the dog sitting area. It had an estimated useful life of 5 years and a residual value of $1,000. What is the amount of depreciation expense for 2013, the second year of the asset's life using the double declining-balance method?
A) $800
B) $1,200
C) $1,360
D) $2,000
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: Long-Term Investments the Time Value of Money
Available Study Resources on Quizplus for this Chatper
189 Verified Questions
189 Flashcards
Source URL: https://quizplus.com/quiz/71381
Sample Questions
Q1) The future value of 1 will always be:
A) equal to 1.
B) greater than 1.
C) less than 1.
D) equal to the interest rate.
Q2) A company that owns more than 50% of the common stock of another company is known as the:
A) parent company.
B) subsidiary company.
C) charge company.
D) dominating company.
Q3) The consolidation method of accounting is appropriate when an investor controls an investee by ownership of more than 50% of the investee's common stock.
A)True
B)False
Q4) Stocks and bonds projected to be held for longer than one year are long-term investments.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Liabilities
Available Study Resources on Quizplus for this Chatper
220 Verified Questions
220 Flashcards
Source URL: https://quizplus.com/quiz/71380
Sample
Questions
Q1) East-West Airlines is planning on leasing an aircraft. East-West does not receive title to the aircraft during or at the end of the lease period. Also, the lease does not contain a bargain purchase option. Using the lease information shown below indicate whether the lease is a capital lease or an operating lease and explain why.
Type of property - Aircraft
Yearly rental - $9,500,000
Lease term - 15 years
Estimated economic life - 25 years
Fair market value of the leased asset - $85,000,000
Present value of lease rental payments - $75,000,000
Q2) If, as part of the accounting for a lease, the company debits an asset and credits a liability, then the lease must be a(n):
A) purchased lease.
B) operating lease.
C) cancelable lease.
D) capital lease.
Q3) Premium on bonds payable is a contra account to bonds payable.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Stockholders Equity
Available Study Resources on Quizplus for this Chatper
126 Verified Questions
126 Flashcards
Source URL: https://quizplus.com/quiz/71391
Sample Questions
Q1) Wilson Corporation had the following transactions:
1. Issued 7,000 shares of common stock with a stated value of $15 for $155,000.
2. Issued 3,000 shares of $100 par value preferred stock at $117 for cash.
Required: Prepare the journal entries for the above transactions.
Q2) When preferred stock is cumulative, preferred dividends not paid in a year are:
A) distributions of earnings.
B) called dividends in arrears.
C) a liability.
D) never paid to the preferred stockholders.
Q3) Convertible preferred stock is usually convertible into the company's common stock at the discretion of the preferred stockholder.
A)True
B)False
Q4) Treasury stock is a contra-stockholders' equity account.
A)True
B)False
Q5) A Loss on Issue of Common Stock indicates that the stock was sold for less than its par value.
A)True
B)False
Page 12
To view all questions and flashcards with answers, click on the resource link above.
Chapter
Income, the Statement of Stockholders Equity
Available Study Resources on Quizplus for this Chatper
125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/71390
Sample Questions
Q1) The following items are extraordinary items EXCEPT:
A) newly enacted laws.
B) natural disasters.
C) expropriation of company assets by a foreign government.
D) losses on a failing product line.
Q2) Which entity requires companies issuing publicly traded stock to have their financial statements audited by an external auditor?
A) Securities and Exchange Commission
B) Internal Revenue Service
C) Committee of Sponsoring Organizations
D) Financial Accounting Standards Board
Q3) Items of comprehensive income, other than net income, do not enter into the determination of earnings per share.
A)True
B)False
Q4) The net of foreign-currency transaction gains and losses will appear on the balance sheet.
Page 13
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 12: The Statement of Cash Flows
Available Study Resources on Quizplus for this Chatper
125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/71389
Sample Questions
Q1) The three categories on the statement of cash flows are listed in order of dollar amount.
A)True
B)False
Q2) During the year, Engine Engineering Corporation has operating expenses of $30,000. There was an increase in prepaid expenses of $5,000 and an increase in accrued liabilities of $7,000. What were Engine's cash payments for operating expenses?
A) $42,000
B) $32,000
C) $28,000
D) $18,000
Q3) Westside, Inc. reported Cost of Goods Sold for the current year of $320,000. During the same period, the Inventory account decreased $15,000 and the Accounts Payable account increased $25,000. The amount of cash paid to suppliers is:
A) $360,000.
B) $330,000.
C) $310,000.
D) $280,000.
To view all questions and flashcards with answers, click on the resource link above.
14
Chapter 13: Financial Statement Analysis
Available Study Resources on Quizplus for this Chatper
125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/71388
Sample Questions
Q1) If ABC Corporation's debt ratio is higher than its major competitors, ABC may:
A) purchase treasury stock.
B) sell treasury stock.
C) invest in another company.
D) be unable to pay its debts.
Q2) The ratio that provides an estimate of the number of days, on average, that it takes for customers to pay their account is the:
A) days' sales in receivables
B) current ratio.
C) accounts receivable turnover.
D) acid-test ratio.
Q3) A measure of a company's ability to collect cash from credit customers is the:
A) accounts receivable turnover.
B) earnings per share.
C) inventory turnover.
D) acid-test ratio.
Q4) In the statement of cash flows, depreciation and amortization are considered a use of funds.
A)True
B)False
Page 15
To view all questions and flashcards with answers, click on the resource link above.