Accounting Fundamentals
Mock Exam
Course Introduction
Accounting Fundamentals introduces students to the basic principles and concepts of accounting, focusing on the systematic recording, reporting, and analysis of financial transactions. The course covers the accounting cycle, including journal entries, ledgers, trial balances, financial statement preparation, and the use of accounting software. Emphasis is placed on understanding the role of accounting in business decision-making, the interpretation of key financial reports, and adherence to generally accepted accounting principles (GAAP). By the end of the course, students will have developed foundational skills needed for further studies in accounting and finance.
Recommended Textbook
Financial Accounting 15th Edition by Jan
Williams
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16 Chapters
2478 Verified Questions
2478 Flashcards
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Page 2
Chapter 1: Accounting: Information for Decision Making
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134 Verified Questions
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Sample Questions
Q1) Objectives of financial reporting to external investors and creditors include preparing information about all of the following except:
A) Information used to determine which products to produce.
B) Information about economic resources, claims to those resources, and changes in both resources and claims.
C) Information that is useful in assessing the amount, timing, and uncertainty of future cash flows.
D) Information that is useful in making investment and credit decisions.
Answer: A
Q2) The Sarbanes-Oxley Act places responsibility on CEOs and CFOs of companies to certify the fairness of company's financial statements. The Act also created the Public Company Accounting Oversight Board which oversees the public accounting profession.
A)True
B)False
Answer: True
Q3) The information is intended to be used for planning and control decisions.
Answer: Management
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Chapter 2: Basic Financial Statements
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Sample Questions
Q1) The owner of a sole proprietorship is personally liable for the debts of the business, whereas the stockholders of a corporation are not personally liable for the debts of the business.
A)True
B)False
Answer: True
Q2) The payment of a business debt not including interest:
A) Decreases total assets.
B) Increases total liabilities.
C) Increases the owners' equity in the business.
D) Decreases the owners' equity in the business.
Answer: A
Q3) It is not unusual for an entity to report a significant increase in cash from operating activities, but a decrease in the total amount of cash.
A)True
B)False
Answer: True
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Chapter 3: The Accounting Cycle: Capturing Economic Events
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161 Flashcards
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Sample Questions
Q1) In a trial balance prepared at December 31, 2011 the total of the debit column is:
A) $805,000.
B) $780,000.
C) $415,000.
D) $390,000.
Answer: D
Q2) Every transaction which affects an income statement account also affects a balance sheet account.
A)True
B)False
Answer: True
Q3) Which of the following is not considered an analytical aspect of the accounting profession?
A) Evaluating an organization's operational efficiency.
B) Forecasting the probable results of future operations.
C) Designing systems that provide information to decision makers.
D) Journalizing and posting business transactions.
Answer: D
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Chapter 4: The Accounting Cycle: Accruals and Deferrals
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Sample Questions
Q1) Interest that has accrued during the accounting period on a note payable requires an adjusting entry consisting of:
A) A debit to Interest Expense and a credit to Cash.
B) A debit to Notes Payable and a credit to Interest Payable.
C) A debit to an asset and a credit to a liability.
D) A debit to Interest Expense and a credit to Interest Payable.
Q2) The period of time over which the cost of an asset is allocated to depreciation expense is called its useful life.
A)True
B)False
Q3) No adjusting entry should consist of:
A) A debit to an expense and a credit to an asset.
B) A debit to an expense and a credit to revenue.
C) A debit to an expense and a credit to a liability.
D) A debit to a liability and a credit to revenue.
Q4) Accumulated depreciation is:
A) The depreciation expense recorded on an asset to date.
B) The remaining book value of an asset.
C) The depreciation expense taken on an asset during the current period.
D) An expense on the income statement.
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Chapter 5: The Accounting Cycle: Reporting Financial
Results
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Sample Questions
Q1) If monthly financial statements are desired by management:
A) Journalizing and posting adjusting entries must be done each month.
B) Journalizing and posting closing entries must be done each month.
C) Monthly financial statements can be prepared from worksheets; adjustments and closing entries need not be entered in the accounting records.
D) Adjusting and closing entries must be entered in the accounting records before preparation of interim financial statements.
Q2) What is the total debits on the after-closing trial balance?
A) $222.
B) $372.
C) $233.
D) $161.
Q3) If a business closes its accounts only at year-end:
A) Financial statements are prepared only at year-end.
B) Adjusting entries are made only at year-end.
C) Revenue and expense accounts reflect year-to-date amounts throughout the year.
D) Monthly and quarterly financial statements cannot be prepared.
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Page 7
Chapter 6: Merchandising Activities
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Sample Questions
Q1) Net sales and gross profit
Mayflower Supply House had gross sales revenue of $1,700,000, cost of goods sold of $950,000, sales returns and allowances of $52,500, and allowed sales discounts of $30,000.
Compute for the year:
\(\begin{array}{|l|l|}
\hline \text { (a) Net sales. } & \$ \underline{\quad\quad}\\ \hline \text { (b) Gross profit. } & \$\underline{\quad\quad} \\ \hline \text { (c) Gross profit rate. } &\underline{\quad\quad}\% \\ \hline
\end{array}\)
Q2) Bernice Beverages is not satisfied with the quality of merchandise purchased from Reade Supplies. If American Supplies agrees to settle this matter by granting Bernice Beverages a sales allowance, Bernice Beverages will:
A) Return the entire shipment to Reade Supplies and receive a full refund.
B) Return only that portion of the merchandise that it is unable to sell within the discount period.
C) Keep the merchandise, but pay a reduced purchase price.
D) Keep the merchandise and sell it at a reduced sales price.
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Page 8
Chapter 7: Financial Assets
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Sample Questions
Q1) Compensating balances are not included in the amount of cash listed on a balance sheet.
A)True
B)False
Q2) Financial assets include all of the following except:
A) Cash.
B) Marketable securities.
C) Inventories.
D) Accounts receivable.
Q3) The mark-to-market adjustment:
A) Affects both the balance sheet and the current period income statement.
B) Is not made when the current market value of investments in marketable securities is higher than original cost.
C) May result in either a gain or a loss to be reported in the current period income statement.
D) Represents a departure from the cost principle.
Q4) Cash equivalents include money market funds, U.S. Treasury bills, and high-grade commercial paper.
A)True
B)False
Page 9
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Chapter 8: Inventories and the Cost of Goods Sold
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Sample Questions
Q1) The CPA firm auditing Capri Corporation found that net income had been overstated. Which of the following could be the cause?
A) Failure to take advantage of purchase discounts by paying within the discount period.
B) Overstatement of inventory at year-end.
C) Use of the last-in, first-out (LIFO) method of valuing inventory in a period of rising prices.
D) Failure to record payment of an account payable to a supplier on the last day of the year.
Q2) Short-term creditors are likely to view a higher-than-average inventory turnover rate as indicating that:
A) A company is in financial difficulty.
B) The company is able to sell its inventory quickly.
C) The company probably has an excessive amount of inventory.
D) The company has a longer-than-average operating cycle.
Q3) Because of the consistency principle, inventory should never be written down below cost.
A)True
B)False
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Chapter 9: Plant and Intangible Assets
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Sample Questions
Q1) In its financial statements, Shoreham uses double-declining-balance depreciation with half-year convention. The book value of the equipment at December 31, 2009, will be:
A) $20,267.
B) $12,667.
C) $25,333.
D) Some other amount.
Q2) Which of the following is not a capital expenditure?
A) Advertising expenditures to introduce a new product line.
B) Sales tax paid in conjunction with the purchase of new machinery.
C) Installation of elevators to replace escalators.
D) An amount paid to acquire a patent with a remaining life of only three years.
Q3) Which of the following situations is impossible?
A) Book value is greater than residual value.
B) Book value is equal to the residual value.
C) Book value is less than residual value.
D) Book value is less than the original cost.
Q4) To capitalize an expenditure means charging it to an asset account.
A)True
B)False
Page 11
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Chapter 10: Liabilities
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Sample Questions
Q1) Employees' annual "take-home-pay," totals approximately:
A) $672,300.
B) $762,300.
C) $675,000.
D) $741,150.
Q2) A bond that is not secured is also known as:
A) A sinking fund.
B) A mortgage.
C) A debenture.
D) A junk bond.
Q3) Which of the following does not affect the market price of an outstanding bond issue?
A) Fluctuations in the current market rate of interest.
B) The credit rating of the issuing corporation.
C) The price at which the bonds were originally issued.
D) The length of time remaining until the bonds' maturity date.
Q4) There is a tax advantage for a company to issue bonds in lieu of stocks.
A)True
B)False
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Chapter 11: Stockholders Equity: Paid-In Capital
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Sample Questions
Q1) International accounting standards require mandatory redeemable preferred stock to be classified as a liability on the balance sheet and not as equity.
A)True B)False
Q2) The sale of treasury stock at a price in excess of its cost results in a realized gain which should be presented as a non-operating item in the income statement.
A)True B)False
Q3) When a corporation issues capital stock at a price higher than the par value:
A) The amount received over par value increases retained earnings.
B) The entire issue price is credited to the Capital Stock account.
C) The amount received in excess of par value constitutes profit to the issuing corporation.
D) The amount received in excess of par value becomes part of paid-in capital.
Q4) The balance in Retained Earnings at the beginning of the year was $650,000, and there were no dividends in arrears. Net income for 2010 was $475,000. What was the amount of dividend declared on each share of common stock during 2010? $_____ per share
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Page 13
Chapter 12: Income and Changes in Retained Earnings
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Sample Questions
Q1) What was the average issue price per share of preferred stock?
Q2) Earnings per share is equal to net income applicable to common stock, divided by the weighted number of common shares outstanding.
A)True
B)False
Q3) Special sections in an income statement What is the purpose of arranging an income statement to show subtotals for Income from Continuing Operations and for Income before Extraordinary Items?
Q4) A liquidating dividend:
A) Occurs only when a company is going out of business.
B) Occurs when a corporation pays a dividend that exceeds the balance in the retained earnings account.
C) Is an expense to the corporation.
D) Occurs only when the corporation has a loss for the year.
Q5) Dividends are first recorded and retained earnings are reduced on:
A) The ex-dividend date.
B) The date of record.
C) The date of declaration.
D) The date of payment.
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) Based solely on the above information, Kenny's net cash flow from investing activities for 2010 is:
A) $215,000 net cash used by investing activities.
B) $165,000 net cash provided by investing activities.
C) $265,000 net cash used by investing activities.
D) $290,000 net cash provided by investing activities.
Q2) The amount of cash paid by Hierarchy to acquire plant assets during the current year was:
A) $252,000.
B) $504,000.
C) $724,000.
D) $768,000.
Q3) The amount of cash paid by Johnson to acquire plant assets during the current year was:
A) $53,000.
B) $267,000.
C) $42,000.
D) $160,000.
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15
Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Which of the following is not a measure of long-term credit risk?
A) Quick ratio.
B) Debt ratio.
C) Interest coverage ratio.
D) Trend in net cash provided by operating activities.
Q2) Supreme's gross profit rate was:
A) 42.9%.
B) 57.7%.
C) 20.0%.
D) 31.7%.
Q3) If a company has a current ratio of 2 to 1, and purchases inventory on credit, what will this do to its current ratio?
A) Increase the current ratio.
B) Decrease the current ratio.
C) Does not change the current ratio.
D) Cannot be determined.
Q4) Inventory is an example of a quick asset.
A)True
B)False
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Chapter 15: Global Business and Accounting
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Sample Questions
Q1) Hedging refers to the strategy of taking offsetting positions so that gains in one currency offset losses in another currency.
A)True
B)False
Q2) Establishing international accounting standards is the responsibility of:
A) Securities and Exchange Commission.
B) International Accounting Standards Board.
C) Financial Accounting Standards Board.
D) Accounting Association of America.
Q3) In a planned economy, ownership of land and the means of production are private and markets dictate the allocation of resources and the output among segments of the economy.
A)True
B)False
Q4) The number of dollars equivalent to -50,000 on this date is:
A) 31,250.
B) 80,000.
C) 32,500.
D) Depends upon whether the item is a receivable or a payable.
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Chapter 16: The Time Value of Money
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Sample Questions
Q1) (a) How long will it take Barbara to accumulate $30,000 to buy a car if she invests $15,000 at 5%? (b) How long will it take if she invests the same amount at 4% semi-annually?
Q2) The present value of an investment is:
A) The amount an investor would pay today to receive a certain amount in the future.
B) The amount an investor would pay today plus the interest the investor would expect to receive a certain amount in the future.
C) The amount an investor would pay today less the interest the investor requires.
D) 90% of the future value of an investment.
Q3) The future value of an investment gradually increases toward the present amount. A)True B)False
Q4) The future amount of an annuity is calculated by multiplying the periodic payment amount by the discounted factor from the future value of an annuity table. A)True B)False
Q5) Explain how compound interest applies to the time value of money.
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Page 18