Accounting I Exam Questions
Course Introduction
Accounting I is an introductory course that explores the fundamental principles and concepts of financial accounting. Students will learn how to systematically record, classify, and summarize financial transactions in accordance with generally accepted accounting principles (GAAP). The course covers the accounting cycle, preparation of key financial statements such as the balance sheet, income statement, and statement of cash flows, and an introduction to ethical accounting practices. By strengthening analytical and problem-solving skills, students will gain a foundational understanding of how accounting information supports business decision-making and the role of accountants in various organizational settings.
Recommended Textbook
Financial Accounting 8th Edition by Walter T. Harrison
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Page 2
Chapter 1: The Financial Statements
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Sample Questions
Q1) The statement of cash flows is organized in terms of the organization's operating, investing, and financing activities.
A)True
B)False
Answer: True
Q2) Generally, three factors influence business and accounting decisions-
A)operating, investing, and financing activities.
B)assets, liabilities, and equity.
C)economic, legal, and ethical.
D)revenues, expenses, and dividends.
Answer: C
Q3) International financial reporting standards are set by the:
A)IASB.
B)GAAP.
C)FASB.
D)SEC.
Answer: A
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Page 3
Chapter 2: Transaction Analysis
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Sample Questions
Q1) The normal balance of a revenue account is a __________ because revenues increase __________.
A)debit, assets
B)debit, expenses
C)debit, stockholders' equity
D)credit, stockholders' equity
Answer: D
Q2) Which statement is NOT true?
A)A credit increases a liability account.
B)A debit increases an asset account
C)Revenues are increased by a debit.
D)Expenses are increased by a debit.
Answer: C
Q3) A trial balance is an optional financial statement that reports the financial position of the company as of a given day in time.
A)True
B)False
Answer: False
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Chapter 3: Accrual Accounting Income
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Sample Questions
Q1) The book value of an asset that cost $20,000 and has accumulated depreciation of $6,000 is:
A)$20,000.
B)$ 6,000.
C)$26,000.
D)$14,000.
Answer: D
Q2) The cost of assets used up in the process of earning revenue are considered:
A)assets.
B)expenses.
C)dividends.
D)stockholders' equity.
Answer: B
Q3) In accrual adjustments, the revenue or expense is recognized before the cash is received or paid.
A)True
B)False
Answer: True
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Chapter 4: Internal Control Cash
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Sample Questions
Q1) A bank statement included a NSF check from customer Kim Fields for $2,100. The journal entry to record this reconciling item should:
A)debit NSF and credit Cash for $2,100.
B)debit Cash and credit Accounts Receivable for $2,100.
C)debit Accounts Receivable and credit Cash for $2,100.
D)debit Cash and credit NSF for $2,100.
Q2) Depository accounts are "one-way" accounts, since local management can write checks on the account but cannot deposit money into the account.
A)True
B)False
Q3) Internal controls help to prevent fraud.
A)True
B)False
Q4) A malicious computer program that hides inside a legitimate program and works like a virus is a(n):
A)encryption device.
B)phishing expedition.
C)computer virus.
D)Trojan horse.
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Chapter 5: Short-Term Investments Receivables
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Sample Questions
Q1) Which of the following would NOT be included in the numerator of the acid-test ratio?
A)Accounts receivable
B)Cash-equivalents
C)Inventories
D)Short-term investments
Q2) A debit balance in the Allowance for Uncollectible Accounts:
A)cannot occur.
B)is the normal balance.
C)occurs when the actual bad debt write-offs are less that what was estimated.
D)occurs when the actual bad debt write-offs are greater than what was estimated.
Q3) Chauky's Catering accepted a bank-issued credit card in payment of a $4,000 sales transaction. Chauky's bank charges 3% to process the transaction. The journal entry to record the sales transaction will include:
A)a credit to Sales Revenue for $3,880.
B)a debit to Cash for $4,000.
C)a debit to Financing Expense for $120.
D)all of these.
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Chapter 6: Inventory and Cost of Goods Sold
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Sample Questions
Q1) Only freight-out costs associated with merchandise inventory are included in cost of goods sold.
A)True
B)False
Q2) On the income statement, after a company computes gross profit, it subtracts:
A)cost of goods sold.
B)inventory.
C)operating expenses.
D)all of the above.
Q3) The use of the FIFO method generally increases taxable income:
A)when prices are constant.
B)when prices are declining.
C)when prices are increasing.
D)under all circumstances.
Q4) When using the average-cost method to determine the cost of inventory, the average cost per unit is calculated as the cost of goods:
A)in ending inventory, divided by the number of units in ending inventory.
B)sold, divided by the number of units sold.
C)available for sale, divided by the number of units available for sale.
D)sold, divided by the average number of units in inventory.
Page 8
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Chapter 7: Plant Assets Intangibles
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Sample Questions
Q1) The process of allocating the cost of a plant asset to expense over its life is:
A)amortization.
B)depletion.
C)matching.
D)depreciation.
Q2) A revision of an estimate which will extend the asset's useful life is called a change in accounting:
A)theory.
B)policy.
C)procedure.
D)estimate.
Q3) The journal entry to record depletion would include:
A)a debit to Depletion Expense and credit to Accumulated Depreciation.
B)a debit to Accumulated Depletion and a credit to Depletion Expense.
C)a debit to Depletion Expense and a credit to Accumulated Depletion.
D)none of the above.
Q4) A gain will result when the book value of a plant asset exceeds the cash received from the sale of the asset.
A)True
B)False
Page 9
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Chapter 8: Liabilities
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Sample Questions
Q1) The fair market value of long-term debt:
A)is never shown on the financial statements.
B)is shown on the financial statements if it results in the company has an operating loss.
C)is required to be reported on the financial statements.
D)is reported in the financing activities section of the statement of cash flows.
Q2) A high times-interest-earned ratio indicates ease in paying interest expense.
A)True
B)False
Q3) Convertible bonds allow the investor to exchange a bond receivable for the issuing company's preferred stock.
A)True
B)False
Q4) Which of the following statements about capital leases is INCORRECT?
A)A capital lease is noncancelable.
B)A capital lease is a long-term financial obligation.
C)Under a capital lease, the lessee records a lease liability at the beginning of the lease term.
D)Under a capital lease, the lessee's books do not report the leased asset.
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Page 10
Chapter 9: Stockholders Equity
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Sample Questions
Q1) Mary, a shareholder in the Doggy Boutique, owns 500 share of their common stock. Mary receives a 10% stock dividend. After the stock dividend, Mary will have:
A)a total of 50 shares of Doggy Boutique common stock.
B)a total of 500 shares of Doggy Boutique common stock.
C)a total of 550 shares of Doggy Boutique common stock.
D)an undetermined number of shares, since the number of shares of stock cannot be determined from the information given.
Q2) Jazzy Corporation's stockholders' equity section of the balance sheet reports: Common Stock ($10 par value, 50,000 shares authorized, 15,000 shares issued)$150,000;
Paid-in Capital in Excess of Par Value-Common $50,000; Retained Earnings, $300,000. The book value per share for common stock is:
A)$10.00.
B)$13.33.
C)$20.00.
D)$33.33.
Q3) The rate of return on capital assets is a measure of the firm's profitability.
A)True
B)False
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Chapter 10: Long-Term Investments International Operations
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Sample Questions
Q1) On the financial statements, the foreign-currency gains and losses are netted and reported as one amount on the income statement.
A)True
B)False
Q2) The two main factors affecting the exchange rate of a particular currency are the:
A)ratio of the country's imports to its exports and the economics of the country.
B)ratio of the country's imports to its exports and the stability of the country.
C)rate of return available in the country's capital markets and the ratio of the country's imports to its exports .
D)rate of return available in the country's capital markets and the stability of the country.
Q3) Issuing bonds are shown on the statement of cash flows as:
A)operating activities.
B)investing activities.
C)financing activities.
D)none of the above. It is not shown on the statement of cash flows.
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12
Chapter 11: The Income Statement the Statement of
Stockholders Equity
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Sample Questions
Q1) The actual market value of a corporation can be calculated by:
A)multiplying the shares outstanding times the current market price per share.
B)subtracting the current market price per share from the shares outstanding.
C)dividing the current market price per share by the shares outstanding.
D)dividing the shares outstanding by the current market price per share.
Q2) Income tax expense helps measure net income.
A)True
B)False
Q3) Net income was understated in the previous year. The entry to record the correction includes a:
A)credit to Income Summary.
B)debit to Retained Earnings.
C)debit to Income Summary.
D)credit to Retained Earnings.
Q4) 1.securities of $15,000. The ending balance in accumulated other comprehensive income is:
A)$365,000.
B)$245,000.
C)$275,000.
D)$325,000.
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Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) The statement of cash flows is designed to fulfill all of the following purposes EXCEPT to:
A)assess the collectability of accounts receivable.
B)show the relationship of net income to changes in the company's cash.
C)help predict future cash flows.
D)evaluate management decisions.
Q2) When preparing a statement of cash flows, the sum of operating and investing and financing activities equals the:
A)change in cash for the period.
B)cash inflow for the period.
C)ending cash balance.
D)net income as reported on the income statement.
Q3) When preparing the statement of cash flows using the indirect method, which statement is NOT true?
A)Depreciation expense is added to net income.
B)Gains on the sale of long-term assets are subtracted from net income.
C)Losses on the sale of long-term assets are subtracted from net income.
D)Increases in current liabilities are added to net income.
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) The ratio that states the proportion of a company's assets that is financed with debt is the:
A)debt ratio.
B)leverage.
C)times-interest-earned ratio.
D)rate of return on total assets.
Q2) The current ratio is calculated as:
A)current assets divided by total liabilities.
B)current assets divided by current liabilities.
C)current assets times current liabilities.
D)total assets divided by total liabilities.
Q3) Which of the following is typically used as the base in a vertical analysis of an income statement?
A)Net sales
B)Net income
C)Gross sales
D)Cash
Q4) Cost of capital varies with a company's level of risk.
A)True
B)False
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