Accounting I Exam Practice Tests
Course Introduction
Accounting I introduces students to the fundamentals of financial accounting, focusing on the concepts and procedures used to record, classify, and summarize business transactions. This course covers the accounting cycle, preparation of financial statements, and the analysis of assets, liabilities, and equity. Emphasis is placed on understanding the role of accounting in decision-making and the ethical considerations that guide financial reporting. Students will gain practical experience in using accounting systems and tools, setting a solid foundation for further study in accounting and business.
Recommended Textbook
Financial Accounting Information for Decisions 6th Edition by John Wild
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16 Chapters
3236 Verified Questions
3236 Flashcards
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Page 2
Chapter 1: Introducing Accounting in Business
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261 Verified Questions
261 Flashcards
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Sample Questions
Q1) If Madiera Company paid $42,000 of its accounts payable in cash,what would be the effect of this transaction on assets,liabilities and equity?
Answer: Assets would decrease $42,000,liabilities would decrease $42,000 and equity would not change.
Q2) Investing activities are the acquiring and selling of resources that an organization uses in its everyday operations.
A)True
B)False
Answer: True
Q3) Discuss the relationship of risk to return.
Answer: Net income is related to return.Risk is the uncertainty about the amount of the expected return.In general,the lower the risk of an investment,the lower the expected return.Higher return is expected in exchange for accepting higher risk.
Q4) The income statement reports on operating activities at a specific point in time.
A)True
B)False
Answer: False
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3
Chapter 2: Analyzing and Recording Transactions
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221 Flashcards
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Sample Questions
Q1) Double-entry accounting is an accounting system:
A)That records each transaction twice
B)That records the effects of transactions and other events in at least two accounts with equal debits and credits
C)In which the impact of each transaction is recorded in two or more accounts but that could include two debits and no credits
D)That may only be used if T-accounts are used
E)That insures that errors never occur
Answer: B
Q2) Which of the following formulas can be used to calculate the debt ratio?
A)Total Equity/Total Liabilities
B)Total Liabilities/Total Equity
C)Total Liabilities/Total Assets
D)Total Assets/Total Liabilities
E)Total Equity/Total Assets
Answer: C
Q3) The _______________________ is a record containing all accounts (with balances)used by a company.
Answer: General ledger (or ledger)
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Page 4
Chapter 3: Adjusting Accounts and Preparing Financial Statements
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268 Flashcards
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Sample Questions
Q1) The time period principle assumes that an organization's activities can be divided into specific time periods.
A)True
B)False
Answer: True
Q2) The length of time covered by a set of periodic financial statements is referred to as the:
A)Fiscal cycle
B)Natural business year
C)Accounting period
D)Business cycle
E)Operating cycle
Answer: C
Q3) Accrual accounting and the adjusting process rely on two principles: the ___________________ principle and the ________________________ principle.
Answer: Revenue recognition; matching
Q4) Profit margin = ___________________ divided by net sales.
Answer: Net income
Page 5
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Chapter 4: Reporting and Analyzing Merchandising Operations
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196 Flashcards
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Sample Questions
Q1) A company uses the perpetual inventory system and recorded the following entry: \[\begin{array} { | l | r | r | }
\hline \text { Accounts Payable } & 2,500 & \\
\hline \text { Merchandise Inventory } & & 50 \\
\hline \text { Cash } & & 2,450 \\
\hline \end{array}\]
This entry reflects a:
A)Purchase
B)Return
C)Sale
D)Payment of the account payable and recognition of a cash discount taken
E)Purchase and recognition of a cash discount taken
Q2) ___________________ refer to reductions in the selling price of merchandise sold to customers,often involving damaged or defective merchandise that a customer is willing to purchase with a decrease in the selling price.
Q3) In a periodic inventory system,cost of goods sold is recorded as each sale occurs.
A)True
B)False
Page 6
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Chapter 5: Reporting and Analyzing Inventories
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Sample Questions
Q1) Under LIFO,the most recent costs are assigned to ending inventory. A)True B)False
Q2) Given the following information,determine the cost of goods sold for November 30 using the FIFO perpetual inventory method.
November 3: 15 units were purchased at $8 per unit.
November 11: 18 units were purchased at $9.50 per unit.
November 15: 15 units were sold at $45 per unit
November 18: 30 units were purchased at $10.75 per unit
November 30: 20 units were sold at $55 per unit
Q3) Errors in the period-end inventory balances only have an impact on the current period's records and financial statements. A)True B)False
Q4) _______________________ is the estimated sales price of damaged goods minus the cost of making the sale.
Q5) Goods in transit are automatically included in a company's inventory account. A)True B)False
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Chapter 6: Reporting and Analyzing Cash and Internal Controls
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Sample Questions
Q1) Triple Company's accountant made an entry that included the following items: debit postage expense $12.42; debit office supplies expense $27.33,debit to cash over/short $2.19.If the original amount in petty cash is $320,how much was the credit to cash for the reimbursement?
A)$320.00
B)$202.44
C)$37.56
D)$39.75
E)$41.94
Q2) A company established a petty cash fund in May of the current year and experienced the following transactions affecting the fund during May:
May 1 Establish petty cash account in the amount of $300
May 5 Paid for miscellaneous office supplies in the amount of $53.22
May 9 Reimbursed Human Resource Manager for business lunch,$45.09
May 15 Paid for minor landscaping services,$75.00
May 22 Paid $65.00 for postage
May 31 Counted remaining cash and discovered that $56.34 remained Prepare the journal entry to establish the fund on May 1.
Q3) A __________________________ is a document explaining the payment of a check.
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Chapter 7: Reporting and Analyzing Receivables
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Sample Questions
Q1) A company has $80,000 in outstanding in accounts receivables and it uses the allowance method to account for uncollectible accounts.Experience suggests that 5% of outstanding receivables are uncollectible.The current credit balance (before adjustments)in the allowance for doubtful accounts is $600.The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $4,000.
A)True
B)False
Q2) The ____________________ of a note is the day the principle plus interest of a note must be repaid.
Q3) A promissory note:
A)Is a short-term investment for the maker
B)Is a written promise to pay a specified amount of money at a certain date
C)Is a liability to the payee
D)Is another name for an installment receivable
E)Cannot be used in payment of an account receivable
Q4) The matching principle requires use of the direct write-off method of accounting for bad debts.
A)True
B)False
Page 9
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Chapter 8: Reporting and Analyzing Long-Term Assets
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Sample Questions
Q1) A company purchased property for a building site.The costs associated with the property were:
\(\begin{array}{|l|r|}
\hline \text { Purchase price } & \$ 175,000 \\
\hline \text { Real estate commissions } & 15,000 \\
\hline \text { Legal fees } & 800 \\
\hline \text { Expenses of clearing the land } & 2,000 \\
\hline \text { Expenses to remove old building } & 1,000\\ \hline \end{array}\)
What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?
A)$175,800 to Land; $18,800 to Building
B)$190,000 to Land; $3,800 to Building
C)$190,800 to Land; $1,000 to Building
D)$192,800 to Land; $0 to Building
E)$193,800 to Land; $0 to Building
Q2) The three usual means for disposal of an asset are:
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Page 10
Chapter 9: Reporting and Analyzing Current Liabilities
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188 Flashcards
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Sample Questions
Q1) The annual Federal Unemployment Tax Return is:
A)Form 940
B)Form 1099
C)Form 104
D)Form W-2
E)Form W-4
Q2) An employee earnings report is a cumulative record of an employee's hours worked,gross earnings,deductions and net pay.
A)True
B)False
Q3) Wal-Mart had income before interest expense and income taxes of $12,581 million and interest expense of $1,063 million.Sears had income before interest expense and income taxes of $3,596 million and interest expense of $1,143 million.Calculate the times interest earned ratio for each company and comment on the results.
Q4) When companies pay the government collected sales tax,sales taxes payable is credited and cash is debited.
A)True
B)False
Q5) Gross pay less all deductions is called ____________________.
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Chapter 10: Reporting and Analyzing Long-Term Liabilities
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Sample Questions
Q1) A company can reserve the right to retire bonds before their maturity date by issuing _______________ bonds.
Q2) On January 1,2010,Jacob issues $600,000 of 11%,15-year bonds at a price of 102½.Six years later,on January 1,2016,Jacob retires 30% of these bonds by buying them on the open market at 98½. All interest is accounted for and paid through December 31,2015,the day before the purchase.The straight-line method is used to amortize any bond discount.What is the carrying value of the bond on January 1,2016?
A)$472,000
B)$531,076
C)$584,924
D)$609,000
E)$600,000
Q3) GAAP criteria for identifying a lease as a capital lease are more general than the criteria under IFRS.
A)True
B)False
Q4) _______________ bonds have specific assets of the issuing company pledged as collateral.
Q5) The par value of a bond is also known as its ________________________.
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Chapter 11: Reporting and Analyzing Equity
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Sample Questions
Q1) The Discount on Common Stock account reflects:
A)The difference between the par value of stock and its issue price when the issue price is below par value.
B)One share's portion of the issued corporation's net assets recorded in its accounts
C)The difference between the par value of the stock and the amount contributed by stockholders when the amount contributed is more than par value
D)An amount of assets defined by state law that stockholders must invest and leave invested in a corporation
E)The amount a corporation must pay in addition to dividends in arrears if and when it exercises its right to retire a share of callable preferred stock
Q2) _______________________________ is the total amount of cash and other assets received by the corporation from its stockholders in exchange for common stock.
Q3) _______________________ generally consists of a company's cumulative net income less any net losses and dividends declared since its inception.
Q4) Identify and discuss the key differences between common and preferred stock.
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Chapter 12: Reporting and Analyzing Cash Flows
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Sample Questions
Q1) The purchase of stock in another company is considered to be a financing activity.
A)True
B)False
Q2) When analyzing the changes on a spreadsheet used to prepare a statement of cash flows,the cash flows from operating activities generally affect:
A)Net income,current assets and current liabilities
B)Noncurrent assets
C)Noncurrent liability and the equity accounts
D)Both noncurrent assets and noncurrent liabilities
E)Equity accounts only
Q3) A purchase of land in exchange for shares of stock is disclosed on the statement of cash flows or in a note to the statement.
A)True
B)False
Q4) The indirect method reports individual operating cash outflows and cash inflows by activity.
A)True
B)False
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Chapter 13: Analyzing and Interpreting Financial Statements
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186 Flashcards
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Sample Questions
Q1) The evaluation of company performance and financial condition includes evaluation of (1)past and current performance, (2)current financial position and (3)future performance and risk.
A)True
B)False
Q2) What is the purpose of a good financial statement analysis report? What are the key components?
Q3) Reporting of discontinued segments includes:
A)Income or loss from operating the discontinued segment net of tax and gain or loss from disposal of the segment's net assets net of tax
B)Extraordinary items
C)Changes in accounting principle
D)Items that are both unusual and infrequent
E)Writing off of receivables
Q4) The return on total equity measures a company's success in reaching the goal of earning net income for its owners.
A)True
B)False
Q5) Identify and explain the four building blocks of financial statement analysis.
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Chapter 14: Investments and International Operations
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Sample Questions
Q1) What is comprehensive income and how is it usually reported in the financial statements?
Q2) What are the accounting basics for equity securities,including acquisition,dividends earned and disposition?
Q3) Foreign exchange rates fluctuate due to changing _______________ and ___________ conditions.
Q4) The controlling investor is referred to as the:
A)Owner
B)Subsidiary
C)Parent
D)Investee
E)Senior entity
Q5) Comprehensive income refers to all changes in equity during a period except those due to investments and distributions to income.
A)True
B)False
Q6) A long-term investment is recorded at cost when purchased.
A)True
B)False
Page 16
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Chapter 15: Reporting and Analyzing Partnerships
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Sample Questions
Q1) Groh and Jackson are partners.Groh's capital balance in the partnership is $64,000 and Jackson's capital balance is $61,000.Groh and Jackson have agreed to share equally in income or loss.Groh and Jackson agree to accept Block with a 25% interest.Block will invest $35,000 in the partnership.The capital account balances after admission of Block are:
A)Block $35,000,Groh $64,000,and Jackson $61,000.
B)Block $35,000,Groh $66,500,and Jackson $63,500.
C)Block $40,000,Groh $64,000,and Jackson $61,000.
D)Block $40,000,Groh $61,500,and Jackson $58,500.
E)Block $40,000,Groh $66,500,and Jackson $63,500.
Q2) During 2010,Schmidt invested $75,000 and Baldwin invested $90,000 in a partnership.They agreed that Baldwin would get a salary allowance of $30,000 and they would share any remaining income or loss equally.During 2010 the partnership earned net income of $300,000 and they each withdrew $12,000 from the partnership.Which of the following statements is correct?
A)Schmidt Capital at the end of 2010 is $213,000.
B)Schmidt Capital at the end of 2010 is $210,000.
C)Baldwin Capital at the end of 2010 is $243,000.
D)Baldwin Capital at the end of 2010 is $255,000.
E)Total Capital at the end of 2010 has increased by $300,000.
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Chapter 16: Reporting and Preparing Special Journals
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Sample Questions
Q1) Accounting information systems are designed to capture information about a company's transactions and events and to provide output including financial,managerial and tax reports.
A)True
B)False
Q2) _______________________ are links among computers giving different users and different computers access to common databases and programs.
Q3) Effective accounting information systems will do all of the following except:
A)Collect and process data from transactions and events
B)Organize data in useful forms
C)Communicate information to business decision makers
D)Are crucial to effective decision-making
E)Eliminate all errors.
Q4) Segment information is often useful to investors for evaluating a company's profitability,risk and growth.
A)True
B)False
Q5) What is the segment return on assets ratio? What is it used for?
Q6) Discuss how technology based information systems affect accounting.
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