Accounting I Exam Review
Course Introduction
Accounting I introduces students to the fundamental principles and concepts of financial accounting. This course covers the accounting cycle, including the recording, classification, and summarization of business transactions. Students will learn how to prepare and interpret basic financial statements such as the balance sheet, income statement, and statement of owner's equity. Emphasis is placed on understanding assets, liabilities, equity, revenues, and expenses, and applying generally accepted accounting principles (GAAP). By the end of the course, students will have a solid foundation in the terminology, processes, and ethical standards essential for further study in accounting.
Recommended Textbook
Corporate Financial Accounting 15th Edition by Carl S. Warren
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15 Chapters
3080 Verified Questions
3080 Flashcards
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Chapter 1: Accounting and Business
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244 Verified Questions
244 Flashcards
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Sample Questions
Q1) Revenue is earned only when money is received.
A)True
B)False
Answer: False
Q2) Financial accounting provides information to all users, while the main focus for managerial accounting is to provide information to the management.
A)True
B)False
Answer: True
Q3) Ramierez Company received its first electric bill in the amount of $60 which will be paid next month. How will this transaction affect the accounting equation?
Answer: Increase liabilities (Accounts Payable) and decrease shareholders' equity (Utilities Expense)
Q4) Owned by two or more individuals
A)Proprietorship
B)Partnership
C)Corporation
Answer: B
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Page 3
Chapter 2: Double-Entry Accounting
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Sample Questions
Q1) The classification and normal balance of the dividends account is
A) an expense with a credit balance
B) an expense with a debit balance
C) a liability with a credit balance
D) stockholders' equity with a debit balance
Answer: D
Q2) When an owner invests assets in the business, the retained earnings account increases due to revenue being earned.
A)True
B)False
Answer: False
Q3) Expenses follow the same debit and credit rules as A) revenues
B) assets
C) none of these
D) liabilities
Answer: B
Q4) On September 1, Erika Company purchased land for $47,500 cash. Provide the journal entry for this transaction.
Answer: 11ea84e6_b037_e967_9a63_1f8392b119e0_TB2281_00_TB2281_00
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Chapter 3: Adjustments: Accruals and Deferrals
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Sample Questions
Q1) For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that expired. For the year ending December 31, what is the effect of these errors on revenues, expenses, and net income?
A) revenues are overstated by $4,200
B) net income is overstated by $2,300
C) expenses are overstated by $6,500
D) expenses are understated by $3,500
Answer: B
Q2) The matching principle requires expenses be recorded in the same period that the related revenue is recorded.
A)True
B)False
Answer: True
Q3) (a) Explain the differences between accrued revenues and unearned revenues. (b) Explain the differences between accrued expenses and prepaid expenses. (c) Give an example of each.
Answer: 11ea84e6_b02f_3654_9a63_fdc742da560f_TB2281_00_TB2281_00
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Chapter 4: The Accounting Cycle
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Sample Questions
Q1) After all of the account balances have been extended to the Balance Sheet columns of the end-of-period spreadsheet, the totals of the Debit and Credit columns are $36,755 and $32,735, respectively. What is the amount of net income or net loss for the period?
A) $4,020 net income
B) $36,755 net loss
C) $4,020 net loss
D) $32,735 net income
Q2) Determine the total assets.
A) $25,130
B) $16,830
C) $22,930
D) $24,030
Q3) Prepaid insurance is reported on the balance sheet as a
A) current asset
B) fixed asset
C) current liability
D) long-term liability
Q4) List and describe the purpose of the four closing entries.
Q5) Describe a classified balance sheet.
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Chapter 5: Accounting for Retail Businesses
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Sample Questions
Q1) Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the goods sold is $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions?
Q2) Gross profit minus selling expenses equals net income.
A)True
B)False
Q3) If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are
A) n/30
B) FOB shipping point
C) FOB destination
D) consigned
Q4) A physical inventory at the end of June was $882,000. Estimated Returns Inventory is expected to increase to $16,500. Prepare a multiple-step income statement for Cerelat Co. showing how cost of goods sold was calculated for the year ended June 30.
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Chapter 6: Inventories
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Sample Questions
Q1) Under a periodic inventory system
A) accounting records continuously disclose the amount of inventory
B) a separate account for each type of merchandise is maintained in a subsidiary ledger
C) a physical inventory is taken at the end of the period
D) inventory is debited when goods are returned to vendors
Q2) If the revenues are correctly reported and the gross profit of a company is understated, what is the effect on stockholders' equity?
A) understated
B) overstated
C) correctly stated
D) none of these
Q3) One unit is sold on October 31 for $28. Using the table provided, determine gross profit under the FIFO method.
A) $28
B) $13
C) $15
Q4) List three different security measures taken to safeguard inventory.
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Chapter 7: Internal Control and Cash
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Sample Questions
Q1) bank service charge
A)added to the company's books
B)subtracted from the company's books
C)added to the bank statement balance
D)subtracted from the bank statement balance
Q2) In preparing a bank reconciliation, the amount of an error indicating the recording of a check in the journal for an amount larger than the amount of the check is added to the balance per company's records.
A)True
B)False
Q3) A voucher system is an example of an internal control procedure over cash payments.
A)True
B)False
Q4) A company's days' cash on hand is computed by dividing:
A) cash and short-term investments by daily cash operating expenses.
B) cash by total cash operating expenses.
C) cash, short-term investments, and accounts receivable by daily cash operating expenses.
D) average cash over the period by daily cash operating expenses.
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Chapter 8: Receivables
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Sample Questions
Q1) At the end of the current year, Accounts Receivable has a balance of $700,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $3,500,000. Bad debt expense is estimated at 1/2 of 1% of net 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.
Q2) Other receivables include nontrade receivables such as loans to company officers. A)True B)False
Q3) Small companies can use either the direct write-off method or the allowance method. A)True B)False
Q4) The maturity value of a note receivable is always the same as its face value. A)True B)False
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Chapter 9: Long-Term Assets: Fixed and Intangible
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Sample Questions
Q1) On December 31, Strike Company has decided to discard one of its batting cages. The equipment had an initial cost of $310,000 and has accumulated depreciation of $260,000. Depreciation has been recorded up to the end of the year. Which of the following will be included in the entry to record the disposal?
A) Accumulated Depreciation, debit, $310,000
B) Loss on Disposal of Asset; debit, $260,000
C) Equipment, credit, $310,000
D) Gain on Disposal of Asset, credit, $50,000
Q2) iTunes music
A)Patent
B)Copyright
C)Trademark
D)Goodwill
Q3) As a company records depreciation expense for a period of time, cash is accumulated to replace fixed assets as they wear out.
A)True
B)False
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Chapter 10: Liabilities: Current, Installment Notes, and Contingencies
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Sample Questions
Q1) On January 1, Year 1, Zero Company obtained a $52,000, 4-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, Year 1. The December 31, Year 2 carrying amount in the allocation of periodic payments table for this installment note will be equal to
A) $26,000
B) $27,635
C) $21,642
D) $28,402
Q2) On May 18, Rodriguez Co. issued an $84,000, 6%, 120-day note payable on an overdue account payable to Wilson Company. Assume that the fiscal year of Rodriguez ends on June 30. Which of the following relationships is true?
A) Rodriguez is the creditor and credits Accounts Receivable
B) Wilson is the creditor and debits Accounts Receivable
C) Wilson is the borrower and credits Accounts Payable
D) Rodriguez is the borrower and debits Accounts Payable
Q3) Receiving payment prior to delivering goods or services causes a current liability to be incurred.
A)True
B)False
Page 12
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Chapter 11: Liabilities: Bonds Payable
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Sample Questions
Q1) The legal contract between issuer and bond holder
A)carrying amount
B)face value
C)callable bond
D)indenture
E)term bond
F)convertible bond
G)serial bond
Q2) One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.
A)True
B)False
Q3) The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to
A) debit Bonds Payable, credit Cash
B) debit Cash and Discount on Bonds Payable, credit Bonds Payable
C) debit Cash, credit Premium on Bonds Payable and Bonds Payable
D) debit Cash, credit Bonds Payable
Q4) How should any unamortized premium be reported on the balance sheet of the issuing corporation?
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Chapter 12: Corporations: Organization, Stock Transactions, and Dividends
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Sample Questions
Q1) The reduction in the par or stated value of common stock, accompanied by the issuance of a proportionate number of additional shares, is called a stock split.
A)True
B)False
Q2) A large public corporation normally uses registrars and transfer agents to maintain records of the stockholders.
A)True
B)False
Q3) The amount of a corporation's retained earnings that has been restricted/appropriated should be reported in the notes to the financial statements.
A)True
B)False
Q4) If common stock is issued for an amount greater than par value, the excess should be credited to
A) Retained Earnings
B) Cash
C) Legal Capital
D) Paid-In Capital in Excess of Par
Page 14
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) The net income reported on an income statement for the current year was $63,000. Depreciation recorded on fixed assets for the year was $24,000. Balances of the current asset and current liability accounts at the end and beginning of the year are listed below. Prepare the Cash Flows from Operating Activities section of the statement of cash flows using the indirect method. \[\begin{array} { l r r }
& \text { End } & \text { Beginning } \\
\text { Cash } & \$ 65,000 & \$ 70,000 \\
\text { Accounts receivable (net) } & 70,000 & 57,000 \\
\text { Inventories } & 86,000 & 102,000 \\
\text { Prepaid expenses } & 4,000 & 4,500 \\
\text { Accounts payable (merchandise creditors) } & 51,000 & 58,000 \\
\text { Cash dividends payable } & 4,500 & 6,500 \\
\text { Salaries payable } & 6,000 & 7,500
\end{array}\]
Q2) If accounts payable have increased during a period,
A) revenues on an accrual basis are less than revenues on a cash basis
B) expenses on an accrual basis are less than expenses on a cash basis
C) expenses on an accrual basis are the same as expenses on a cash basis
D) expenses on an accrual basis are greater than expenses on a cash basis
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Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) What is the return on total assets for Diane Company?
A) 10.0%
B) 8.0%
C) 0.10%
D) 1.0%
Q2) price-earnings (P/E) ratio
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) A common measure of liquidity is
A) the asset turnover ratio
B) dividends per share of common stock
C) the accounts receivable turnover
D) the profit margin
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Page 16
Chapter 15:Investments
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Sample Questions
Q1) Unrealized gains and losses on trading securities are not included in the calculation of income from operations.
A)True
B)False
Q2) Jacks Corporation purchases $200,000 bonds plus accrued interest for 2 months of $2,000 from Kennedy Company on March 1. The bonds have an annual interest rate of 6% payable on June 30 and December 31. The entry to record the purchase of the bonds would include a
A) debit to Interest Receivable for $2,000
B) debit to Investment in Bonds for $202,000
C) debit to Cash for $200,000
D) credit to Interest Revenue for $2,000
Q3) Armando Company owns 17,000 of the 70,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies. The investment should be accounted for by the
A) equity method
B) market method
C) cost or market method
D) fair value method
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Page 17