Accounting I
Chapter Exam Questions
Course Introduction
Accounting I is an introductory course designed to familiarize students with the fundamental principles and practices of financial accounting. The course covers essential topics such as the accounting cycle, double-entry bookkeeping, preparation and analysis of financial statements, and the ethical considerations in accounting. Students will develop skills in recording and summarizing transactions, managing ledgers, and understanding the impact of accounting decisions on businesses. By the end of the course, students will be able to interpret basic financial information and gain a strong foundation for more advanced accounting studies.
Recommended Textbook
College Accounting A Practical Approach 12th Canadian Edition by Jeffrey Slater
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Chapter 1: Accounting Concepts and Procedures
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Q1) Which of the following transactions would cause one asset to increase and another asset to decrease?
A)The owner invested cash in the business.
B)The business paid a creditor.
C)The business incurred an expense on credit.
D)The business bought supplies for cash.
Answer: D
Q2) The purpose of the accounting process is to provide financial information about:
A)sole proprietorships.
B)small businesses.
C)large corporations.
D)All of these answers are correct.
Answer: D
Q3) Which accounts are affected when the company pays salaries?
A)Assets and Capital
B)Liabilities and Capital
C)Assets and Expenses
D)None of the above are correct.
Answer: C
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Page 3
Chapter 2: Debits and Credits: Analyzing and Recording
Business Transactions
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Q1) The debit side is always the right side of the account.
A)True
B)False
Answer: False
Q2) The Accounts Receivable account has total debit postings of $1,900 and credit postings of $1100. The balance of the account is:
A)$800 debit.
B)$800 credit.
C)$2,600 credit.
D)$2,600 debit.
Answer: A
Q3) The entry to record Tom's payment of a home telephone bill is:
A)debit Telephone Expense; credit Accounts Payable.
B)debit Tom's Withdrawals; credit Cash.
C)debit Telephone Expense; credit Cash.
D)debit Tom's Withdrawals; credit Accounts Payable.
Answer: B
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Page 4
Chapter 3: Beginning the Accounting Cycle
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Q1) If the debit and credit totals of a trial balance are not equal, it could be due to the following type of error:
A)Failure to record a transaction
B)Recording the same erroneous amount for both the debit and the credit sides of a transaction
C)Incorrectly calculating the debit side of the trial balance
D)Recording the same transaction more than once
Answer: C
Q2) The posting reference column in the ledger is:
A)used to record the journal and page number the transactions originated.
B)used to record the ledger number.
C)used to record the date.
D)not used.
Answer: A
Q3) To correct an error made in the journal (prior to posting in the ledger):
A)erase the error and write the correct entry.
B)line out the incorrect portion of the entry and write in the correction.
C)ignore the error, it will correct itself in the next accounting period.
D)write a new journal entry correcting the original entry.
Answer: B
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Chapter 4: The Accounting Cycle Continued
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Q1) The inside columns on the financial statements are used to:
A)show debits.
B)show credits.
C)show subtotals.
D)None of these answers are correct.
Q2) Equipment was purchased for $20,000, residual value is $2,000 and it is expected that the useful life is 10 years. What is the amount in the Accumulated Depreciation account after 3 years assuming straight-line depreciation?
$ ________
Q3) Sarah's Spices' accrued wages are $1,800. Which of the following is the required adjusting entry?
A)Debit Salaries Expense, $1,800; credit Salaries Payable, $1,800
B)Credit Salaries Expense, $1,800; debit Salaries Payable, $1,800
C)Debit Cash, $1,800; credit Salaries Expense, $1,800
D)Debit Salaries Payable, $1,800; credit Cash, $1,800
Q4) Prepaid Rent is an asset with a normal balance of a debit.
A)True
B)False
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Chapter 5: The Accounting Cycle Completed
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Q1) Determine the ending owner's equity of a business having a beginning owner's equity of $4,200, withdrawals of $1,500, and after closing the revenues and expenses Income Summary has a credit balance of $4,750.
$ ________
Q2) A real account is the same as a permanent account.
A)True
B)False
Q3) To close the Fees Earned account:
A)debit Income Summary; credit Fees Earned.
B)debit Fees Earned; credit Capital.
C)debit Fees Earned; credit Income Summary.
D)debit Capital; credit Fees Earned.
Q4) The post-closing trial balance is used to determine if the ledger is in balance after closing.
A)True B)False
Q5) After posting adjusting entries, the temporary accounts will be set back to zero. A)True
B)False
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Chapter 6: Banking Procedure and Control of Cash
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Q1) ________ Replenishment of petty cash
Q2) If the owner of Que Legal Services forgot to deduct a withdrawal from the balance per books, what entry would be necessary?
A)Debit Cash; credit Withdrawals
B)Debit Withdrawals; credit Cash
C)Debit Revenue; credit Cash
D)Debit cash; credit Revenue
Q3) The credit recorded in the journal to replenish the petty cash fund is to:
A)Cash.
B)Petty Cash.
C)Accounts Receivable.
D)Accounts Payable.
Q4) The petty cash overage was not recorded. This would cause:
A)revenues to be overstated.
B)revenues to be understated.
C)expenses to be overstated.
D)expenses to be understated.
Q5) What is the difference between a debit and credit memorandum?
Q6) ________ Owner withdrew money from the company for personal use
Q7) ________ Bought a book of stamps
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Chapter 7: Calculating Pay and Payroll Taxes: The
Beginning of the Payroll Process
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Q1) The law that governs overtime earnings is called:
A)Federal Insurance Contribution Act.
B)Federal Wage and Hour Law.
C)Fair Labor Standards Act.
D)Both B and C are correct.
Q2) Kim received $1,850 for working 40 hours. What was Kim's rate of pay per hour?
A)$46.25
B)$44.00
C)$45.00
D)$40.00
Q3) Carrie Stein's hourly wage is $40.00, and she worked 42 hours during the week. Assuming an overtime rate of time and a half over 40 hours, Carrie's gross pay is:
A)$1,780.
B)$1,720.
C)$2,580.
D)$1,600.
Q4) Why would a business decide to use an external company to prepare their payroll checks and related reports?
Q5) What is the purpose of the Fair Labor Standards Act?
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Chapter
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Q1) Prepare the general journal entry to record the payroll.
Q2) When a business starts, what must it obtain that identifies itself to the government?
A)State Employment Number
B)Federal Unemployment Number
C)Employer Identification Number
D)A look-back period Page 10
Q3) Different deposit rules apply to employers based on the amount collected and owed by that employer.
A)True
B)False
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Chapter 9: Sales and Cash Receipts
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Q1) Payment for merchandise sold on credit for $100 subject to 1/10 n/30 was received within the discount period-$99 was received. This was recorded with a debit to Sales Discounts for $1, a debit to Cash for $99, and a credit to Accounts Receivable $100, but no mention was made of the subsidiary ledger account. This error will cause:
A)the net income for the period to be overstated.
B)the net income for the period to be understated.
C)the control account to not agree with the subsidiary ledger.
D)the assets to be overstated.
Q2) The liability account used to record sales tax owed is:
A)Sales Tax Expense.
B)Prepaid Taxes.
C)Sales Tax Payable.
D)Sales.
Q3) The accounts receivable subsidiary ledger:
A)is organized in alphabetical order.
B)is not kept in the same book as Accounts Receivable.
C)should equal the controlling account in the general ledger.
D)All of the above are correct.
Q4) Compare and discuss a discount period versus a credit period.
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Chapter 10: Purchases and Cash Payments
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Q1) Determine the total cost of a purchase paid for within the discount period with an invoice price of $7,000 and credit terms of 2/10, n/30 when $1,500 has already been returned for credit. The goods were purchased with freight terms of F.O.B shipping point and freight of $50.
$ ________
Q2) Medeco bought goods for $250 on credit. Medeco returned $50 worth of goods. Terms of the sale were 2/10, n/30. If Medeco pays the amount owed within the discount period, what is the amount they should pay?
A)$250
B)$204
C)$196
D)$200
Q3) Heidi's Accessories bought 50 necklaces for $10 each on account. The invoice included a 6% sales tax and payment terms of 2/10, n/30. In addition, 5 necklaces were returned prior to payment. The entry to record the purchase would include:
A)a debit to Accounts Payable for $530.
B)a debit to Accounts Payable for $500.
C)a debit to Purchases for $530.
D)a debit to Purchases for $500.
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Page 13
Chapter 11: Preparing a Worksheet for a Merchandise Company
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Q1) The normal balance of Rental Income is:
A)a credit.
B)a debit.
C)zero.
D)dependent on the circumstances.
Q2) Beginning and ending inventories for Webster's Books are $9,000 and $6,000, respectively. The debit amounts (not including Income Summary)in the income statement columns of the worksheet total $14,000, and the credit amounts (not including Income Summary)total $15,500. The firm has a:
A)net income of $1,500.
B)net loss of $1,500.
C)net loss of $3,000.
D)net income of $3,000.
Q3) Sales would be found on the worksheet in the:
A)income statement debit column.
B)income statement credit column.
C)balance sheet debit column.
D)balance sheet credit column.
Q4) Why is beginning and ending inventory kept as two separate figures in the cost of goods sold section?
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Chapter 12: Completion of the Accounting Cycle for a Merchandise Company
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Q1) The statement of owner's equity ending capital is equal to the capital on the worksheet.
A)True
B)False
Q2) The formal income statement can be prepared from the income statement columns of the worksheet.
A)True
B)False
Q3) A classified balance sheet provides more information about the company to:
A)owners.
B)creditors.
C)suppliers.
D)All of the above answers are correct.
Q4) What is the name of the revenue account used by merchandise companies?
A)Sales
B)Interest Income
C)Merchandise Inventory
D)Capital
Page 15
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Chapter 13: Accounting for Bad Debts
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Q1) The adjustment for bad debts using the percentage of receivables ignored the credit balance in the Allowance account. This error would cause:
A)total assets to be overstated.
B)total liabilities to be understated.
C)net income to be understated.
D)None of these are correct.
Q2) Town and Country Saddle learns the account receivable for a customer is uncollectible. The journal entry under the allowance method to write-off an account is to:
A)debit Allowance for Doubtful Accounts; credit Accounts Receivable.
B)debit Sales; credit Allowance for Doubtful Accounts.
C)debit Bad Debts Expense; credit Accounts Receivable.
D)debit Allowance for Doubtful Accounts; credit Bad Debts Expense.
Q3) Under the accrual method of accounting, the allowance method is generally required for financial reporting purposes.
A)True
B)False
Q4) Reinstated an account previously written off under the allowance method.
Debit account ________ Credit account ________
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Page 16
Chapter 14: Notes Receivable and Notes Payable
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Q1) Prepare the journal entries for the following transactions for Dobson Industries Company.
a)Dobson sold $5,000 of merchandise to Bolt Imports Company on account.
b)Dobson accepted a 60-day, 9% note from Bolt in settlement of its account.
c)Bolt defaulted on its note on the maturity date.
d)Collected the previously defaulted Bolt note plus $25 additional interest.
Q2) The terms payee and maker are interchangeable.
A)True
B)False
Q3) Johnson accepts a $5,000, 7%, 100-day promissory note from Adam on November 1. What is the adjusting entry made by Johnson on December 31 to recognize the interest (using a 360-day year)?
A)Debit Interest Expense; credit Interest Payable for $58.33
B)Debit Interest Expense; credit Interest Payable for $97.22
C)Debit Interest Receivable; credit Interest Income for $58.33
D)Debit Interest Receivable; credit Interest Income for $97.22
Q4) On June 1, Mike's Motorcycle Shop accepted a 120-day, 8%, $10,000 note from a customer from the sale of a motorcycle. On July 1, after 30 days, Mike discounted the note at First Bank at 10%. Record the journal entries for Mike's Motorcycles.
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Chapter 15: Accounting for Merchandise Inventory
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Q1) Last year's ending inventory was overstated. This error would cause:
A)this period's net income to be overstated.
B)this period's net income to be understated.
C)this period's end assets to be overstated.
D)None of these are correct.
Q2) The beginning inventory of this year is overstated. This error would cause:
A)the period's net income to be overstated.
B)the period's net income to be understated.
C)the period end assets to be understated.
D)None of these are correct.
Q3) Purchased merchandise with credit terms of 2/10, n/30. - Perpetual Debit ________ & ________ Credit ________ & ________
Q4) Items that are very similar, such as canned goods in a grocery store would be costed using the ________ system of inventory valuation.
Q5) If merchandise is purchased ________, the buyer becomes the owner when the merchandise is placed on the carrier.
Q6) The ________ system of accounting for inventory provides information on a transaction-by-transaction basis.
Q7) Under the perpetual inventory method, purchase returns are credited to ________.
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Chapter 16: Accounting for Property, Plant, Equipment, and Intangible Assets
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Q1) To calculate the double-declining-balance rate, you would divide 2 by the number of years of useful life.
A)True
B)False
Q2) A task station that originally cost $2,500 has no estimated salvage value and was depreciated at the rate of 20% per year (straight-line depreciation). At the end of the third year, it was sold for $1,500 cash. The transaction would result in a:
A)loss of $250.
B)gain of $250.
C)loss of $500.
D)gain of $500.
Q3) Gains incurred in selling or trading assets are always recognized.
A)True
B)False
Q4) For tax purposes, residential real property is depreciated using the straight-line method under MACRS.
A)True
B)False
Q5) A budgeted item such as a building is listed as a ________.
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Chapter 17: Partnership
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Q1) Sue and Jill, who have ending capital balances of $80,000 and $60,000 respectively, agree to admit two new partners. Carlos will buy 1/4 of Sue's interest for $20,000 and 1/3 of Jill's interest for $25,000 directly from the partners. Carmen will invest $30,000 for a $30,000 equity interest. Journalize the entry to admit Carlos and Carmen.
Q2) Kate and Joe formed a partnership in 2012. Joe invested $60,000 and Kate invested $30,000. The partnership had $150,000 in income during 2012. There is no agreement as to how income is divided. Kate and Joe's share is:
A)Kate gets $100,000 and Joe gets $50,000.
B)Kate gets $50,000 and Joe gets $100,000.
C)Kate gets $75,000 and Joe gets $75,000.
D)some other division.
Q3) The last step in a partnership liquidation is to divide any remaining proceeds between and among the partners.
A)True
B)False
Q4) Closed the income summary, there is a net loss.
Debit ________ & ________ & ________ Credit ________ & ________ &
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Chapter 18: Corporations: Organizations and Stock
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Q1) To calculate dividends on par-value preferred stock:
A)multiply the number of shares times rate.
B)multiply rate times par-value.
C)multiply number of shares outstanding times rate times par-value.
D)None of these answers are correct.
Q2) The two main sources of stockholders' equity are investments by stockholders and net income retained in the corporation.
A)True
B)False
Q3) When a company sells stock at an amount greater then par value, the excess amount is referred to as:
A)a discount.
B)a premium.
C)a bonus.
D)Companies cannot sell stock for more than par value.
Q4) The stockholders of a corporation have mutual agency.
A)True
B)False
Q5) Sold preferred stock at a price equal to par value.
Debit ________ & ________ & ________ Credit ________ & ________ &
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Chapter 19: Corporations: Stock Values, Dividends, Treasury
Stocks, and Retained Earnings
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Q1) Which of the following in not true about retained earnings?
A)Declaring a stock split will have no effect on retained earnings.
B)Appropriating retained earnings will have no effect on total stockholders' equity.
C)Distributing stock dividends will have no effect on retained earnings.
D)Declaring cash dividends will increase retained earnings.
Q2) A stock split will not affect total stockholders' equity or the number of shares of stock issued.
A)True B)False
Q3) If total stockholders' equity is $90,000 with 5,000 common shares outstanding, what is the book value per share?
A)$18.00
B)$45.00
C)$17,000
D)$1.80
Q4) In the closing process for corporations, Retained Earnings is used rather than Capital.
A)True B)False
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Chapter 20: Corporations and Bonds Payable
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Q1) Hefley Corporation issued a 10%, $500,000, 8-year bond at 105. The entry to record the issuance transaction is to:
A)debit Cash $500,000; credit Bonds Payable $500,000.
B)debit Cash $525,000; credit Bonds Payable $525,000.
C)debit Cash $525,000; credit Bonds Payable $500,000; credit Premium on Bonds Payable $25,000.
D)debit Cash $500,000; debit Premium on Bonds Payable $25,000; credit Bonds Payable $525,000.
Q2) Condi Corporation sells $100,000, 12%, 10-year bonds for 97 on January 1, 2009. Interest is paid on January 1 and July 1. Straight-line amortization is used. The amount of interest paid on July 1, 2009 is:
A)$6,000.
B)$5,850.
C)$6,150.
D)$12,000.
Q3) The straight-line method amortizes an equal amount of discount to Bonds Interest Expense each period.
A)True B)False
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Chapter 21: Statement of Cash Flows
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Q1) Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in:
A)the operating activities section.
B)the financing activities section.
C)the investing activities section.
D)None of the above.
Q2) A statement of cash flows would not disclose the effect of which of the following transactions?
A)Dividends received on stock investments
B)Receiving cash from customers on product sales
C)Discarding an asset that had been fully depreciated
D)None of these answers are correct.
Q3) The purpose of a cash flow statement is to show the inflows and outflows of cash. A)True
B)False
Q4) Discuss the purpose of a statement of cash flows, and describe its components.
Q5) An example of a noncash expense would be depreciation.
A)True
B)False
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Chapter 22: Analyzing Financial Statements
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Q1) The ratio that indicates the amount of assets that are financed by creditors is:
A)debt to stockholders' equity.
B)debt to total retained earnings ratio.
C)rate of return on common stockholders' equity.
D)None of the above.
Q2) The income before taxes and interest expense of Barry Builders for the year just ended is $230,000. Their interest expense is $20,000 and their income taxes are $80,500. The number of times interest would be earned is:
A)22.0.
B)10.5.
C)11.5.
D)0.5.
Q3) Which of the following ratios measures the earnings of a company on each sales dollar?
A)Return on assets
B)Return on sales
C)Return on inventory
D)Return on stockholders' equity
Q4) Define two types of comparative income statements and compare the information provided by them.
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Chapter 23: The Voucher System
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Q1) To maintain good internal control procedures, the person filing a purchase requisition should never approve the payment.
A)True
B)False
Q2) Borrowed $4,000, signing a 5%, 60 day promissory note.
Debit ________ & ________ & ________ Credit ________ & ________ &
Q3) When a voucher transaction does not fit in the special columns of the voucher register, it will be recorded in the:
A)general journal.
B)sundry column.
C)vouchers payable credit column.
D)both B and C.
Q4) On October 1, Oak Company purchased $12,000 of merchandise from City Seed Company, terms 2/10, n/30, and prepared voucher #222. Cottonwood paid the invoice on October 15.
Required: Prepare journal entries to record the above transactions. Assume Oak uses the net approach method for recording purchases.
Q5) If an account is not paid on time using the net method, the account ________ must be recorded.
Page 26
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Chapter 24: Departmental Accounting
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Q1) The women's shoe department shows gross sales of $245,000 with the cost of the shoes $147,000. The men's shoe department shows gross sales of $184,000 with the cost of the shoes $110,000. What is the gross profit for each department respectively?
A)$392,000 and $294,000
B)$245,000 and $184,000
C)$98,000 and $74,000
D)$429,000 and $257,000
Q2) Indirect expenses are normally:
A)subjective and approximate.
B)assigned by arbitrary methods.
C)assigned precisely by accepted methods.
D)overlooked.
Q3) Which of the following statements is incorrect?
A)Building expense is an indirect expense.
B)Indirect expenses cannot be assigned to different departments based on an allocation such as square feet.
C)If an expense is traceable to a particular department, it is a direct expense.
D)Advertising expense can be both a direct and an indirect expense.
Q4) Explain the difference between a "cost center" and a "profit center."
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Chapter 25: Manufacturing Accounting
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Q1) Indirect costs were understated. This error will cause:
A)the cost of goods manufactured to be overstated.
B)the cost of goods sold to be overstated.
C)the net income to be understated.
D)None of these answers is correct.
Q2) Applied overhead to production.
Debit ________ & ________ & ________ Credit ________ & ________ &
Q3) The adjustment for factory depreciation was ignored. This error will cause:
A)the cost of goods manufactured to be overstated.
B)the cost of goods sold to be understated.
C)the net income to be understated.
D)Answers A and C are correct.
Q4) Which is not an example of a source document?
A)Clock card
B)Bill of lading
C)Lot ticket
D)All are source documents.
Q5) Lumber used in a furniture plant would be considered raw materials inventory.
A)True
B)False
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