Accounting I Exam Review
Course Introduction
Accounting I introduces students to the fundamental principles of accounting, focusing on the systematic recording, reporting, and analysis of financial transactions. The course covers essential topics such as the accounting cycle, preparation of financial statements, double-entry bookkeeping, and the use of journals and ledgers. Students will gain practical skills in managing assets, liabilities, and equity, while understanding the role of accounting information in business decision-making. Through hands-on exercises and real-world examples, this course lays the groundwork for more advanced study in financial and managerial accounting.
Recommended Textbook
Financial Accounting 12th Edition by C. William Thomas
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14 Chapters
2062 Verified Questions
2062 Flashcards
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Page 2
Chapter 1: The Financial Statements
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191 Verified Questions
191 Flashcards
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Sample Questions
Q1) Every corporation must pay dividends every year.
A)True
B)False
Answer: False
Q2) Decision makers who use accounting information include: A)creditors.
B)the Internal Revenue Service.
C)the Securities and Exchange Commission.
D)all of the above.
Answer: D
Q3) The CORRECT data flow from one financial statement to the next is:
A)statement of retained earnings,income statement,balance sheet,statement of cash flows.
B)balance sheet,statement of retained earnings,income statement,statement of cash flows.
C)statement of retained earnings,income statement,statement of cash flows,balance sheet.
D)income statement,statement of retained earnings,balance sheet,statement of cash flows.
Answer: D
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Chapter 2: Transaction Analysis
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Sample Questions
Q1) Accounts Receivable is increased with a credit.
A)True
B)False
Answer: False
Q2) Each transaction has either an equal effect on both the left- and right-sides of the accounting equation,or an offsetting effect (both positive and negative)on the same side of the equation.
A)True
B)False
Answer: True
Q3) On March 31,Baker Company received a bill and paid for advertising costs for the current month.This payment results in a:
A)debit to Cash.
B)debit to Prepaid Advertising.
C)debit to Advertising Expense.
D)credit to Advertising Revenue.
Answer: C
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Chapter 3: Accrual Accounting Income
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Sample Questions
Q1) Following the expense recognition principle,to recognize expenses along with the related revenues,means to:
A)add expenses and revenues together to compute net income or net loss.
B)recognize the expense of a period against the cash revenues of another period.
C)abandon the matching principle.
D)subtract expenses from the related revenues to compute net income or net loss.
Answer: D
Q2) Accrual accounting records the impact of both cash and noncash business transactions as they occur.
A)True
B)False
Answer: True
Q3) Which of the following is CORRECT regarding liquidity?
A)Liquidity measures how quickly revenue can be earned.
B)Accounts receivable is not a liquid asset.
C)A balance sheet lists assets and liabilities in the order of relative liquidity.
D)Equipment is a highly liquid asset.
Answer: C
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5
Chapter 4: Internal Control Cash
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Sample Questions
Q1) The company should split duties of purchasing goods,receiving goods,preparing payment,and approving payment.
A)True
B)False
Q2) A petty cash fund:
A)is established to pay large nonrecurring expenses.
B)is established to pay for minor purchases.
C)should have a least two custodians.
D)should issue checks for certain purchases.
Q3) The control environment does NOT include:
A)a corporation's code of ethics.
B)prohibition of bribes and kickbacks.
C)risk assessment.
D)prohibition of transactions that involve a conflict of interest.
Q4) In a bank reconciliation,items recorded by the bank,but not yet recorded by the company,include:
A)deposits in transit.
B)bank collections of accounts receivable.
C)outstanding checks.
D)both deposits in transit and outstanding checks.
Page 6
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Chapter 5: Receivables and Revenue
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Sample Questions
Q1) The principal amount of a note is the amount borrowed by the creditor.
A)True
B)False
Q2) The quick ratio and the day's sales outstanding measure:
A)a company's cash conversion cycle.
B)a company's profitability.
C)a company's liquidity.
D)all of the above.
Q3) If Abby,Inc.sells items to a customer who uses a credit card for $1,900,and there is a credit card fee of 2.5%,Abby will record a(n): (Round your final answer to the nearest dollar. )
A)credit to Sales Revenue for $1,852.
B)debit to Accounts Receivable for $1,852.
C)debit to Sales Expense for $48.
D)debit to Credit Card Discount Expense for $48.
Q4) The maker of a note is the borrower.
A)True
B)False
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Chapter 6: Inventory Cost of Goods Sold
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Sample
Questions
Q1) Mariah Company has inventory at the end of the year with a historical cost of $73,000.Mariah Company uses the perpetual inventory system.Under the LCM rule,the current replacement cost is $70,600.The company uses LIFO.Under U.S.GAAP,the journal entry to record the write-down to LCM will:
A)debit Cost of Goods Sold for $2,400 and credit Inventory for $2,400.
B)debit Cost of Goods Sold for $2,400 and credit Purchases for $2,400.
C)debit Inventory for $2,400 and credit Cost of Goods Sold for $2,400.
D)debit Purchases for $2,400 and credit Cost of Goods Sold for $2,400.
Q2) The journal entry to record the purchase of inventory on account under the periodic inventory system is:
A)debit Inventory and credit Accounts Payable.
B)debit Purchases and credit Accounts Payable.
C)debit Cost of Goods Sold and credit Accounts Payable.
D)debit Inventory and credit Cost of Goods Sold.
Q3) Which of the following is NOT used to determine the cost of net purchases?
A)freight-out
B)freight-in
C)purchase returns
D)purchase discounts
Q4) List three ways in which the gross profit method can be used by a retailer.
Page 8
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Chapter 7: Plant Assets, natural Resources, Intangibles
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Sample Questions
Q1) Beck Company trades in old equipment for new equipment.The old equipment has a cost of $10,000 and accumulated depreciation of $9,000.Beck Company pays cash of $21,000.The fair value of the new equipment is $28,000.What is the gain or loss for Beck Company on the exchange of equipment?
A)$6,000 loss
B)$6,000 gain
C)$1,000 loss
D)$1,000 gain
Q2) If a long-term plant asset is impaired,the company is required to adjust the carrying value downward to its:
A)original cost.
B)present value.
C)expected future cash flows.
D)fair value.
Q3) Before accounting for the disposal of a plant asset,the business should bring depreciation up to date in order to determine the asset's original cost.
A)True
B)False
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Chapter 8: Current and Contingent Liabilities
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Sample Questions
Q1) The international accounting standard for loss contingencies:
A)contains the same language and requirements as the U.S.standard.
B)defines the term contingency as a probable obligation that arises from a past event.
C)states that contingencies can,by definition,only be disclosed in the financial statement footnotes.
D)never allows a provision to be recorded.
Q2) The FASB provides guidelines to account for contingent liabilities by:
A)adjusting journal entries only.
B)footnote disclosures only.
C)journal entries and footnote disclosures.
D)preparing a new financial statement.
Q3) When a business receives cash from customers before earning the revenue,the ________ account is credited.
A)Accounts Receivable
B)Sales Tax Payable
C)Accounts Payable
D)Unearned Revenue
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10
Chapter 9: Long-Term Liabilities
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Sample Questions
Q1) The retirement of callable bonds at an amount below face value would appear on a statement of cash flows as an:
A)outflow in the financing activities section.
B)inflow in the financing activities section.
C)outflow in the operating activities section.
D)inflow in the operating activities section.
Q2) Bonds with a face value of $200,000 were sold at an effective interest rate of 8% to yield cash proceeds in excess of $200,000.It is apparent that the bonds had a:
A)stated interest rate less than the market rate.
B)stated interest rate greater than the market rate.
C)effective interest rate less than the stated rate.
D)effective interest rate greater than the market rate.
Q3) Bonds that the issuer may pay off at a prearranged price whenever the issuer chooses before the maturity date are:
A)serial bonds.
B)callable bonds.
C)convertible bonds.
D)debenture bonds.
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) When common stock is issued for services provided to the corporation,the corporation usually recognizes an expense for the fair market value of the services provided.
A)True
B)False
Q2) How does the declaration and payment of cash dividends affect the accounting equation?
A)increase assets and stockholders' equity
B)decrease assets and stockholders' equity
C)increase assets and decrease stockholders' equity
D)decrease assets and increase stockholders' equity
Q3) Another name for Paid-in Capital in Excess of Par is Additional Paid-in Capital.
A)True B)False
Q4) For cash dividends,no journal entry is made on the date of record. A)True
B)False
Q5) What is the formula for the price-earnings ratio? What does this ratio measure?
Q6) List three reasons why corporations purchase their own stock.
Page 12
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) In computing net cash provided by operating activities using the indirect method,each of the following is added to net income EXCEPT:
A)an increase in accrued expenses payable.
B)a gain on sale of equipment.
C)depreciation expense.
D)a decrease in inventory.
Q2) Using the indirect method to prepare the statement of cash flows,an increase in accounts receivable is subtracted from net income in calculating Net cash provided by operating activities.
A)True
B)False
Q3) The financial statement that reports cash receipts and cash payments classified according to the company's operating,investing,and financing activities is the:
A)income statement.
B)balance sheet.
C)statement of cash flows.
D)statement of stockholders' equity.
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) When performing a vertical analysis of the income statement,each line item is stated as a percentage of net income.
A)True
B)False
Q2) Operating earnings should NOT be separated from items that represent isolated or nonrecurring events,such as discontinued operations.
A)True
B)False
Q3) If a company has sales of $250 in 2019 and $225 in 2020,the percentage decrease from 2019 to 2020 is 10%.
A)True
B)False
Q4) Benchmarking common size variables against a key competitor provides meaningful information only if the companies are similar in size.
A)True B)False
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Chapter 13: Investments
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Sample Questions
Q1) On January 1,2019,Corbin Company purchases $176,000,4% bonds at a price of 96 and a maturity date of January 1,2029.Corbin Company intends to hold the bonds until their maturity date and has the ability to do so.Interest is paid semiannually,on January 1 and July 1.Corbin Company has a calendar year end and uses the straight-line amortization method for discounts and premiums.The entry to amortize the bond discount or premium on July 1,2019 is:
A)debit Held-to-Maturity Investment in Bonds for $352 and credit Interest Receivable for $352.
B)debit Cash for $704 and credit Interest Revenue for $704.
C)debit Held-to-Maturity Investment in Bonds for $352 and credit Interest Revenue for $352.
D)debit Held-to-Maturity Investment in Bonds for $704 and credit Interest Revenue for $704.
Q2) Consolidated financial statements combine the financial statements of the parent company and its subsidiaries.
A)True
B)False
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Page 15
Chapter 14: Time Value of Money
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Sample Questions
Q1) Interest is the cost of using money.
A)True
B)False
Q2) You have won $4,400,000 in a lottery.Your winnings will be paid to you in equal annual year-end installments of $440,000 over 10 years.You estimate that you can earn 6% on your investments.The present value of $1 for 10 periods at 6% is 0.558.The present value of an ordinary annuity of $1 for 10 periods at 6% is 7.36.The present value of your $4,400,000 winnings would be closest to:
A)$4,400,000.
B)$3,238,400.
C)$2,978,800.
D)$3,850,000.
Q3) The term time value of money refers to the fact that money earns interest over time. A)True
B)False
Q4) Interest,the cost of using money,is recorded as interest revenue by the borrower.
A)True
B)False
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Page 16