Accounting Fundamentals Final Exam
Course Introduction
Accounting Fundamentals introduces students to the foundational principles and practices of accounting. The course covers essential topics such as the accounting cycle, preparation and analysis of financial statements, double-entry bookkeeping, and the classification of assets, liabilities, and equity. Students will learn how to record, summarize, and interpret business transactions, understand the role of accounting in decision-making, and gain practical skills in maintaining accurate financial records. This course provides the groundwork necessary for further studies in accounting and related business disciplines.
Recommended Textbook
Financial Accounting 11th Edition by Belverd E. Needles
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15 Chapters
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Page 2
Chapter 1: Uses of Accounting Information and the Financial Statements
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Sample Questions
Q1) Financial accounting information is used primarily by management.
A)True
B)False
Answer: False
Q2) Transfer of ownership will not affect the continuity of a A) corporation..
B) sole proprietorship.
C) partnership
D) corporation or partnership.
Answer: A
Q3) The Federal Reserve Board is an example of a labor union.
A)True
B)False
Answer: False
Q4) The statement of retained earnings relates the income statement to the balance sheet by showing how the Retained Earnings account changed during the accounting period.
A)True
B)False Answer: True
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Chapter 2: Analyzing Business Transactions
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Sample Questions
Q1) If office equipment is sold at cost in exchange for a promissory note,
A) total liabilities decrease.
B) stockholders' equity decrease.
C) total assets decrease.
D) total assets remain the same.
Answer: D
Q2) By what amount,if any,would each of the following errors cause a trial balance to be out of balance?
a.A purchase of supplies of $840 was recorded as a debit to Equipment and a credit to Cash for $840.
b.An $890 balance in Prepaid Insurance was copied to the trial balance as a debit of $980.
c.A $600 balance in Accounts Payable was copied to the trial balance as a debit of $600. Answer: a.$0
b.$90 ($980 - $890)
c.$1,200 ($600 + $600)
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4
Chapter 3: Measuring Business Income
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Sample Questions
Q1) Which of the following accounts could decrease as a result of adjusting entries?
A) Prepaid Insurance
B) Accumulated Depreciation-Equipment
C) Supplies Expense
D) Revenue
Answer: A
Q2) The entry to record depreciation on machinery is
A) Accumulated Depreciation-Machinery - Debit; Cash - Credit
B) Depreciation Expense-Machinery - Debit; Machinery - Credit
C) Depreciation Expense-Machinery - Debit; Cash - Credit
D) Depreciation Expense-Machinery - Debit; Accumulated Depreciation-MachineryCredit
Answer: D
Q3) Which of the following accounts is not found in closing entries?
A) Dividends
B) Income Summary
C) Retained Earnings
D) Accumulated Depreciation-Equipment
Answer: D
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Page 5
Chapter 4: Supplement - Closing Entries and the Work Sheet
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Sample Questions
Q1) An important use of the work sheet is as an aid in the preparation of the closing journal entries.
A)True
B)False
Q2) Which of the following accounts probably would have a smaller balance in the Adjusted Trial Balance columns of a work sheet than in the Trial Balance columns?
A) Office Supplies
B) Utilities Payable
C) Accumulated Depreciation-Equipment
D) Rent Expense
Q3) The amount of net income for the period can be found on the work sheet.
A)True
B)False
Q4) The balance sheet cannot be prepared by referring solely to the Balance Sheet columns of the work sheet.
A)True B)False
Q5) Why would a large company probably benefit more from a work sheet than would a very small company?
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Chapter 5: Financial Reporting and Analysis
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Sample Questions
Q1) Which type of account is cost of goods sold?
A) An asset account
B) A liability account
C) An expense account
D) An income account
Q2) It is possible for an asset to be a current asset even though the expected conversion of that asset into cash is to be longer than one year.
A)True
B)False
Q3) Positive operating income will result if gross margin exceeds
A) operating expenses.
B) purchases.
C) cost of goods sold.
D) cost of goods sold minus operating expenses.
Q4) Gross margin equals the difference between net sales and A) income taxes.
B) income before income taxes.
C) operating expenses.
D) cost of goods sold.
Q5) List at least five qualitative characteristics of financial accounting.
Page 7
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Chapter 6: The Operating Cycle and Merchandising Operations
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Sample Questions
Q1) Each of the following companies is a merchandising business except a
A) candy store.
B) car wash.
C) wholesale parts company.
D) furniture store.
Q2) A purchase on account with an invoice price of $1,500 has been made.The entry to record the payment after the 2 percent discount period would include a(n)
A) decrease to Accounts Payable for $1,500.
B) decrease to Purchases Discounts for $30.
C) increase to Accounts Payable for $1,470.
D) decrease to Cash for $1,470.
Q3) Which of the following is not an internal control activity for cash?
A) Surprise audits of cash on hand should be made occasionally.
B) All cash receipts should be recorded promptly.
C) The number of persons who have access to cash should be limited.
D) Most transactions should be in cash to reduce recordkeeping.
Q4) Bonding means insuring a company against employee theft.
A)True
B)False
Page 8
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Chapter 7: Inventories
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Sample Questions
Q1) A cost-to-retail percentage must be calculated when applying the gross profit method.
A)True
B)False
Q2) Which of the following costs usually would not be included in the inventory cost?
A) Ordering costs
B) Related tariffs
C) Invoice price less purchases discounts
D) Freight-in
Q3) Specific identification is a very popular inventory method because it is very easy to apply.
A)True
B)False
Q4) A manufacturer's inventory usually consists of raw materials,work in process,and finished goods.
A)True
B)False
Q5) Why are cost flow assumptions made when accounting for merchandise inventory?
Q6) How is the matching rule applied when accounting for merchandise inventory?
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Chapter 8: Cash and Receivables
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Sample Questions
Q1) A check that is outstanding for two consecutive months will appear only on the first month's bank reconciliation.
A)True
B)False
Q2) Assume that the $2,000,90-day,8 percent note was received on August 31 and that the fiscal year ended on September 30.The adjusting entry that would be made to record the interest receivable is (amounts rounded to nearest dollar):
A) Interest receivable 13
Interest Income 13
B) Notes receivable 13
Interest Income 13
C) Accounts receivable 40
Cash 40
D) Interest income 40
Accounts receivable 40
Q3) The accounts receivable aging method of estimating uncollectible accounts is in violation of the matching principle.
A)True
B)False
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Page 10
Chapter 9: Current Liabilities and Fair Value Accounting
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Sample Questions
Q1) A liability is usually established for product warranties despite uncertainty as to the amount of the liability.
A)True
B)False
Q2) A contingent liability is recorded in the accounting records
A) if the contingency has not been described already in the notes to the financial statements.
B) if it probably will become an actual liability and the exact amount is known.
C) under all circumstances.
D) if it probably will become an actual liability and the amount can be reasonably estimated.
Q3) A business accepts a 9 percent,$25,000 note due in 120 days.Assuming simple interest,how much (amount rounded)will the business receive when the note falls due?
A) $25,000
B) $25,075
C) $25,740
D) $27,260
Q4) List four different types of contingent liabilities and two different types of commitments.
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Chapter 10: Long Term Assets
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Sample Questions
Q1) Which of the following is not a characteristic of an ordinary repair?
A) An expense of the current period.
B) Periodic in nature.
C) Necessary to maintain the asset in good operational condition.
D) Extends the useful life or increases the residual value of the asset.
Q2) A reduction in carrying value as a result of impairment is recorded as a gain.
A)True
B)False
Q3) A delivery truck was purchased for $32,000 two years ago.It has a carrying value of $24,000 and an estimated residual value of $4,000.Assuming the use of straight-line depreciation,the truck's estimated useful life must have been
A) three and one-half years.
B) seven years.
C) 14 years.
D) impossible to determine from the facts given.
Q4) Small expenditures for what ordinarily are considered revenue expenditures are expensed as incurred.
A)True
B)False
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Chapter 11: Long-Term Liabilities
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Sample Questions
Q1) Bonds that mature in installments are called
A) term bonds.
B) debenture bonds.
C) zero coupon bonds.
D) serial bonds.
Q2) A ten-year bond has a face value of $10,000,a face interest rate of 11 percent,an unamortized bond premium of $400,and an effective interest rate of 10 percent.The bonds were issued on one of the semi-annual interest payment dates.The entry to record the bond interest expense on the first semi-annual interest payment date is: (assuming the effective interest method of amortization),
A) Bond Interest Expense 520
Unamortized Bond Premium 30
Cash 550
B) Bond Interest Expense 520
Cash 520
C) Bond Interest Expense 550
Cash 550
D) Unamortized Bond Premium 520
Cash 520
Q3) Mortgage
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Chapter 12: Stockholders Equity
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Sample Questions
Q1) Use the following information to answer the question below. On January 1,2013,Falcon Corporation had 40,000 shares of $10 par value common stock issued and outstanding.All 40,000 shares had been issued in a prior period at $17 per share.On February 1,2013,Falcon purchased 1,000 shares of treasury stock for $19 per share and later sold the treasury shares for $26 per share on March 2,2013. The entry to record the sale of the treasury shares on March 2,2013 is:
A) Cash 26,000
Common Stock 19,000
Retained Earnings 7,000
B) Cash 24,000
Retained Earnings 2,000
Treasury Stock,Common 26,000
C) Cash 26,000
Treasury Stock,Common 19,000
Gain on Treasury Stock,Common 7,000
D) Cash 26,000
Treasury Stock,Common 19,000
Paid-in Capital,Treasury Stock 7,000
Q2) Define outstanding stock.
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Page 14
Chapter 13: The Statement of Cash Flows
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Sample Questions
Q1) Use this information to answer the following question.
Oconee Corporation is preparing a statement of cash flows. The following transactions occurred during the year:
1. Sold machinery for $18,000 cash.
2. Purchased a building for $160,000 cash.
3. Issued $140,000 worth of stock to acquire an airplane.
4. Converted long-term bonds by issuing $200,000 worth of stock.
5. Declared and paid a $20,000 cash dividend.
Transaction 2 would be found on the statement of cash flows in the
A) cash flows from operating activities section.
B) cash flows from financing activities section.
C) cash flows from investing activities section.
D) noncash investing and financing transactions section.
Q2) Why does the acquisition of land in exchange for common stock qualify as a noncash investing and financing transaction?
Q3) Provide the components for the calculation of free cash flow.
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Chapter 14: Financial Performance Measurement
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Sample Questions
Q1) Which of the following describes the interest coverage ratio?
A) Income after income taxes plus interest expense divided by interest expense
B) Income before income taxes plus interest expense divided by interest expense
C) Income after income taxes divided by interest expense
D) Income before income taxes minus interest expense divided by interest expense
Q2) An increase in which of the following ratios is considered unfavorable?
A) Interest coverage ratio
B) Cash flows to assets
C) Quick ratio
D) Days' sales uncollected
Q3) Financial statement analysis can be both past- and future-oriented.
A)True
B)False
Q4) In a common-size balance sheet,which of the following is given a designation of 100 percent?
A) Total assets
B) Net income
C) Current assets
D) Cost of goods sold
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Chapter 15: Investments
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Sample Questions
Q1) A noninfluential and noncontrolling investment is defined as ownership of less than 10 percent of the stock of another company.
A)True
B)False
Q2) Wirt Corporation owns 25 percent of the voting stock of Wood Corporation and accounts for the investment using the equity method.Wood reports a net loss of $20,000.Wirt Corporation's entry to record its share of loss is:
A) Cash 5,000
Investment in Wood Corporation 5,000
B) Loss on Investments 20,000
Investment in Wood Corporation 20,000
C) Loss,Wood Corporation Investment 5,000
Investment in Wood Corporation 5,000
D) Cash 5,000
Loss,Wood Corporation Investment 5,000
Q3) The Allowance to Adjust Long-Term Investments to Market account is placed in the asset section of the balance sheet.
A)True
B)False
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Page 17