Accounting I Exam Bank
Course Introduction
Accounting I introduces the fundamental concepts and principles of accounting, focusing on the accounting cycle for service and merchandising businesses. Students will learn how to analyze and record business transactions, prepare adjusting entries, and create basic financial statements such as the balance sheet, income statement, and statement of owners equity. The course emphasizes practical application of accounting theory, the proper use of journals and ledgers, and an understanding of ethical considerations in financial reporting, providing a solid foundation for further study in accounting and business.
Recommended Textbook
Financial Accounting 15th Edition by Carl Warren
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Page 2
Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) Based on the information for Scott Industries,is it profitable? Explain your answer.
Answer: ($165,000 Fees Earned + $3,000 Interest Income) ($40,000 Salaries and Wages Expense + $44,000 Selling Expenses + $18,000 Income Taxes Expense + $20,000 Rent Expense)= $46,000 Net Income Scott Industries had net income for the period of $46,000.Since revenues exceeded expenses for the period,the company would be considered profitable.
Q2) The role of accounting is to provide many different users with financial information to make economic decisions.
A)True
B)False
Answer: True
Q3) Purchased supplies on credit
A)Increase assets, increase liabilities
B)Increase liabilities, decrease owner's equity
C)Increase assets, increase owner's equity
D)No effect
E)Decrease assets, decrease liabilities
F)Decrease assets, decrease owner's equity
Answer: A
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Page 3
Chapter 2: Analyzing Transactions
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Sample Questions
Q1) Which of the following is <u></b>not</b></u> true with a double-entry accounting system?
A)The accounting equation remains in balance.
B)The sum of all debits is always equal to the sum of all credits in each journal entry.
C)Each business transaction will have two debits.
D)Every transaction affects at least two accounts.
Answer: A
Q2) All owner's equity accounts record increases to the accounts with credits.
A)True
B)False
Answer: False
Q3) In accordance with the debit and credit rules,which of the following is true?
A)Debits increase assets.
B)Credits increase assets.
C)Debits increase both assets and capital.
D)Credits increase both assets and liabilities.
Answer: A
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) The estimated amount of depreciation on equipment for the current year is $5,300.Journalize the adjusting entry to record the depreciation.
Answer: 11ea8d32_286a_a42d_b445_b98bbdc100cf_TB6239_00
Q2) The revenue recognition principle requires that the reporting of revenue be included in the period when cash for the service is received.
A)True
B)False Answer: False
Q3) A company realizes that the last two days' revenue for the month was billed but not recorded.The adjusting entry on December 31 is a debit to Accounts Receivable and a credit to Fees Earned.
A)True
B)False Answer: True
Q4) Unearned revenue is a liability. A)True
B)False
Answer: True
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Accrued revenues are ordinarily listed on the balance sheet as current liabilities.
A)True
B)False
Q2) The balance sheet should be prepared
A)before the income statement and the statement of owner's equity
B)before the income statement and after the statement of owner's equity
C)after the income statement and the statement of owner's equity
D)after the income statement and before the statement of owner's equity
Q3) An end-of-period spreadsheet includes columns for
A)adjusting entries
B)closing entries
C)reversing entries
D)adjusting and closing entries
Q4) Describe a classified balance sheet.
Q5) Once an account has been closed for the period,inserting a line in the balance columns zeros out the account,making it ready for the following period.
A)True
B)False
Q6) List and describe the purpose of the four closing entries.
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Chapter 5: Accounting Systems
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Sample Questions
Q1) After an accounting system has been set up,what is the next step?
A)Create the chart of accounts.
B)Obtain input from users to analyze and improve the system.
C)Implement analysis and design.
D)Set up internal controls.
Q2) Business may be segmented by all of the following except
A)region
B)product line
C)customer type
D)time period
Q3) In which journal would the payment of salaries be posted?
A)cash receipts journal
B)special journal
C)cash payments journal
D)expense journal
Q4) Most accounting systems evolve as the business grows and requires changes in its methods for collecting,accumulating,and reporting information.
A)True
B)False
Q5) Define and describe an accounting system.
Page 7
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Chapter 6: Accounting for Merchandising Businesses
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Sample Questions
Q1) If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer,the terms are
A)consigned
B)n/30
C)FOB shipping point
D)FOB destination
Q2) The most important differences between a service business and a retail business are reflected in their operating cycles and financial statements.
A)True
B)False
Q3) Merchandise inventory is classified on the balance sheet as a
A)current liability
B)current asset
C)long-term asset
D)long-term liability
Q4) The account form of the balance sheet is presented in a downward sequence in three sections.
A)True
B)False
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Chapter 7: Inventories
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Sample Questions
Q1) The inventory method that assigns the most recent costs to cost of merchandise sold is
A)FIFO
B)LIFO
C)weighted average
D)specific identification
Q2) If a company mistakenly counts more items during a physical inventory than actually exist,how will the error affect its bottom line?
A)There will be no change to net income.
B)Net income will be overstated.
C)Net income will be understated.
D)Only gross profit will be affected.
Q3) If a manufacturer ships merchandise to a retailer on consignment,the unsold merchandise should be included in the inventory of the A)consignee
B)retailer
C)manufacturer
D)shipper
Q4) List three different security measures taken to safeguard inventory.
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Chapter 8: Internal Control and Cash
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Sample Questions
Q1) Receipts from cash sales of $3,200 were recorded incorrectly in the cash receipts journal as $2,300.This item would be included on the bank reconciliation as a (n)
A)deduction from the balance per company's records
B)addition to the balance per bank statement
C)deduction from the balance per bank statement
D)addition to the balance per company's records
Q2) Money market accounts,commercial paper,and U.S.Treasury bills are examples of cash equivalents.
A)True
B)False
Q3) Cash equivalents include short-term investments that will be converted to cash within 120 days.
A)True
B)False
Q4) Internal control is enhanced by separating the control of a transaction from the record-keeping function.
A)True
B)False
Q5) Why would a bank require a company to maintain a compensating balance?
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Chapter 9: Receivables
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Sample Questions
Q1) In accounting for uncollectible receivables,the balance in Allowance for Doubtful Accounts will directly impact the amount of the adjustment when applying
A)the direct write-off method
B)the percentage of sales method
C)the analysis of receivables method
D)both the percentage of sales and analysis of receivables methods
Q2) At the end of the current year,Accounts Receivable has a balance of $750,000; Allowance for Doubtful Accounts has a debit balance of $6,200; and sales for the year total $3,500,000.Bad debt expense is estimated at ½ of 1% of sales.Determine
(a)the amount of the adjusting entry for bad debt expense; (b)the adjusted balances of Accounts Receivable,Allowance for Doubtful Accounts,and Bad Debt Expense; and (c)the net realizable value of accounts receivable.
Q3) This method is most often used by small companies with few receivables.
A)Direct write-off method
B)Aging of receivables method
C)Percent of sales method
D)Allowance method
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11
Chapter 10: Long-Term Assets: Fixed and Intangible
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Sample Questions
Q1) On December 31,Strike Company sold one of its batting cages for $55,000.The equipment had an initial cost of $310,000 and has accumulated depreciation of $260,000.Depreciation has been taken up to the end of the year.What is the amount of the gain or loss on this transaction?
A)loss of $55,000
B)loss of $5,000
C)gain of $5,000
D)gain of $55,000
Q2) Outdoor lighting at new business location
A)Land improvements
B)Buildings
C)Land
D)Machinery and equipment
Q3) Cost assessed by city for paving a public street that borders land on which a new business location will be constructed
A)Land improvements
B)Buildings
C)Land
D)Machinery and equipment
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Page 12
Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) Employers are required to compute and report payroll taxes on a calendar-year basis,even if a different fiscal year is used for financial reporting and income tax purposes.
A)True
B)False
Q2) Most employers are required to withhold federal unemployment taxes from employee earnings.
A)True
B)False
Q3) Depending on when an unfunded pension liability is to be paid,it will be classified on the balance sheet as either a long-term or a current liability.
A)True
B)False
Q4) Which of the following would most likely be classified as a current liability?
A)two-year note payable
B)bond payable
C)mortgage payable
D)unearned rent
Q5) Kelly Howard has the following transactions.Prepare the journal entries.
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Chapter 12: Accounting for Partnerships and Limited Liability Companies
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Sample Questions
Q1) Singer and McMann are partners in a business.Singer's original capital was $40,000 and McMann's was $60,000.They agree to salaries of $12,000 and $18,000 for Singer and McMann,respectively,and 10% interest on original capital.If they agree to share the remaining profits and losses on a 3:2 ratio,what will McMann's share of the income be if the income for the year is $30,000?
A)$20,000
B)$18,000
C)$18,600
D)$17,400
Q2) The process of winding up the affairs of a partnership is referred to as realization.
A)True B)False
Q3) When compared to a corporation,one of the major advantages of a partnership is its relative ease of formation.
A)True
B)False
Q4) What is a partnership? List three advantages and three disadvantages of the partnership form of business organization.
Page 14
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Chapter 13: Corporations: Organization, stock Transactions, and Dividends
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Q1) Kansas Company acquired a building valued at $210,000 for property tax purposes in exchange for 12,000 shares of its $5 par common stock.The stock is widely traded and selling for $15 per share.At what amount should the building be recorded by Kansas Company?
A)$60,000
B)$180,000
C)$210,000
D)$120,000
Q2) Cash dividends are normally paid on shares of treasury stock.
A)True
B)False
Q3) On May 10,a company issued for cash 1,500 shares of no-par common stock (with a stated value of $2)at $14,and on May 15,it issued for cash 2,000 shares of $15 par preferred stock at $58.Journalize the entries for May 10 and 15,assuming that the common stock is to be credited with the stated value.
Q4) A sale of treasury stock may result in a decrease in paid-in capital.All decreases should be charged to Paid-In Capital from Sale of Treasury Stock.
A)True
B)False
Page 15
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Chapter 14: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) The entire principal of the bond is paid back on maturity date
A)EPS
B)Face value
C)Callable bond
D)Indenture
E)Term bond
F)Convertible bond
G)Serial bond
Q2) Glenn Corporation issues 1,000,10-year,8%,$2,000 bonds dated January 1 at 96.The journal entry to record the issuance will show a
A)debit to Discount on Bonds Payable for $80,000
B)debit to Cash for $2,000,000
C)credit to Bonds Payable for $1,920,000
D)credit to Cash for $1,920,000
Q3) Using the following table,what is the present value of $15,000 to be received in 10 years,if the market rate is 5% compounded annually?
Q4) The prices of bonds are quoted as a percentage of the bonds' market value.
A)True
B)False
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Chapter 15: Investments and Fair Value Accounting
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Sample Questions
Q1) Zach Company owns 45% of the voting stock of Tomas Corporation and uses the equity method in recording this investment.Tomas Corporation reported a $20,000 net loss.Zach Company's entry would include a
A)credit to cash for $9,000
B)debit to the investment account for $9,000
C)credit to the investment account for $9,000
D)credit to a loss account for $9,000
Q2) Financial statements in which financial data for two or more companies are combined as a single entity are called
A)conventional statements
B)consolidated statements
C)audited statements
D)constitutional statements
Q3) On March 1,Year 1,Chase Inc.purchases 35% of the outstanding shares of Glory Corporation stock for $325,000.On December 31,Year 1,Glory reports net income of $162,000.On January 15,Year 2,Glory pays total dividends to stockholders of $33,000.Journalize the three transactions.
Q4) Discuss why companies invest cash in short-term temporary investments vs.long-term investments.
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Chapter 16: Statement of Cash Flows
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Q1) The statement of cash flows is not one of the basic financial statements.
A)True
B)False
Q2) Changes in current assets and current liabilities are reported on the statement of cash flows,using the indirect method,in the
A)operating activities
B)financing activities
C)investing activities
D)separate schedule of noncash activities
Q3) A corporation uses the indirect method for preparing the statement of cash flows.A fixed asset has been sold for $25,000 representing a gain of $4,500.The value in the operating activities section regarding this event would be
A)$25,000
B)$(4,500)
C)$29,500
D)$4,500
Q4) The statement of cash flows is an optional financial statement.
A)True
B)False
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Chapter 17: Financial Statement Analysis
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Q1) If Epsilon Company's price-earnings ratio on common stock is greater than Iota Company's,then Iota Company would be expected to have the best potential for future common stock price appreciation.
A)True
B)False
Q2) Ratio of liabilities to stockholders' equity
A)Assess the profitability of the assets
B)Assess how effectively assets are used
C)Indicate the ability to pay current liabilities
D)Indicate how much of the company is financed by debt and equity
E)Indicate instant debt-paying ability
F)Assess the profitability of the investment by common stockholders
G)Indicate future earnings prospects
H)Indicate the extent to which earnings are being distributed to common stockholders
Q3) An increase in the accounts receivable turnover may be due to a change in how credit is granted and/or in collection practices.
A)True
B)False
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