Accounting I Exam Solutions
Course Introduction
Accounting I is an introductory course designed to familiarize students with the fundamental principles and practices of financial accounting. The course covers the accounting cycle, including the recording, summarizing, and reporting of financial transactions for service and merchandising businesses. 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 the underlying concepts of assets, liabilities, equity, revenues, and expenses, as well as applying generally accepted accounting principles (GAAP). Practical exercises and examples help students develop the analytical and problem-solving skills necessary for further study in accounting and related business fields.
Recommended Textbook
Corporate Financial Accounting 12th Edition by Carl S. Warren
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15 Chapters
2628 Verified Questions
2628 Flashcards
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Page 2
Chapter 1: Introduction to Accounting and Business
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) Managerial accountants would be responsible for providing which of the following?
A)Tax reports to government agencies.
B)Profit reports to owners and management.
C)Expansion of a product line report to management.
D)Consumer reports to customers.
Answer: C
Q2) Which of the following is not an asset?
A)investment
B)cash
C)inventory
D)stockholder's equity
Answer: D
Q3) Accounting information users need reports about the economic activities and condition of businesses.
A)True
B)False
Answer: True
Q4) What are the three sections of the statement of cash flows?
Answer: Operating Activities,Investing Activities,and Financing Activities
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Chapter 2: Analyzing Transactions
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212 Verified Questions
212 Flashcards
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Sample Questions
Q1) Scott,Inc.issued $40,000 of capital stock.How would this transaction be entered in the journal?
A)Cash 40,000
Capital Stock 40,000
Sold stock for cash.
B)Cash 40,000
Inventory 40,000
Sold stock for cash.
C)Capital Stock 40,000
Cash 40,000
Sold stock for cash.
D)Capital Stock 40,000
Accounts Payable 40,000
Sold stock for cash.
Answer: A
Q2) Liabilities are increased with debits and decreased with credits.
A)True
B)False
Answer: False
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Page 4
Chapter 3: The Adjusting Process
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168 Verified Questions
168 Flashcards
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Sample Questions
Q1) Which of the following is the proper adjusting entry,based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000,for the fiscal year ending on April 30?
A)debit Insurance Expense,$3,000;credit Prepaid Insurance,$3,000
B)debit Insurance Expense,$14,000;credit Prepaid Insurance,$14,000
C)debit Prepaid Insurance,$11,000;credit Insurance Expense,$11,000
D)debit Insurance Expense,$11,000;credit Prepaid Insurance,$11,000
Answer: D
Q2) Prior to the adjusting process,accrued revenue has
A)been earned and cash received
B)been earned and not recorded as revenue
C)not been earned but recorded as revenue
D)not been recorded as revenue but cash has been received
Answer: B
Q3) The updating of accounts is called the adjusting process.
A)True
B)False
Answer: True
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Chapter 4: Completing the Accounting Cycle
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192 Verified Questions
192 Flashcards
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Sample Questions
Q1) A fiscal year that ends when business activities have reached their lowest point is called the natural business year.
A)True
B)False
Q2) The balance in the retained earnings account on the work sheet will equal the amount presented in the balance sheet.
A)True
B)False
Q3) Office Equipment is an example of a current asset account.
A)True
B)False
Q4) The classified balance sheet will have liabilities divided into the following subsections
A)Current Liabilities and Long-Term Liabilities
B)Current Liabilities and Other Liabilities
C)Other Liabilities and Long-Term Liabilities
D)Present Liabilities and Tomorrow's Liabilities
Q5) If working papers are not considered part of the formal accounting records,then why are they used?
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Chapter 5: Accounting for Merchandising Businesses
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217 Verified Questions
217 Flashcards
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Sample Questions
Q1) Because many companies use computerized accounting systems,periodic inventory is widely used.
A)True
B)False
Q2) Anthony Company sold Madison Company merchandise on account FOB shipping point,2/10,net 30,for $10,000.Anthony prepaid the $300 shipping charge.Which of the following entries does Anthony make to record this sale?
A)Accounts Receivable-Madison,debit $10,000;Sales,credit $10,000
B)Accounts Receivable-Madison,debit $10,000;Sales,credit $10,000,and Accounts
Receivable-Madison,debit $300;Cash,credit $300
C)Accounts Receivable-Madison,debit $10,300;Sales,credit $10,300
D)Accounts Receivable-Madison,debit $10,000;Sales,credit $10,000,and Freight Out,debit $300;Cash,credit $300
Q3) Which account will be included in both service and merchandising companies closing entries?
A)Sales
B)Cost of Merchandise Sold
C)Purchase Discounts
D)Sales Returns and Allowances
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Page 7
Chapter 6: Inventories
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163 Flashcards
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Sample Questions
Q1) If the perpetual inventory system is used,the account entitled Merchandise Inventory is debited for purchases of merchandise.
A)True
B)False
Q2) The specific identification inventory method should be used when the inventory consists of identical,low cost units that are purchased and sold frequently.
A)True
B)False
Q3) The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item by item,by major classification of inventory,or by the total inventory.
A)True
B)False
Q4) Damaged merchandise that can be sold only at prices below cost should be valued at
A)net realizable value
B)LIFO
C)FIFO
D)average
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Chapter 7: Sarbanes-Oxley, internal Control, and Cash
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175 Verified Questions
175 Flashcards
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Sample Questions
Q1) Entries are made to the Petty Cash account when
A)making payments out of the fund.
B)recording shortages in the fund.
C)replenishing the petty cash fund.
D)establishing the fund.
Q2) Internal control does not consist of policies and procedures that
A)protect assets from misuse
B)aid management in directing operations toward achieving business goals
C)guarantee the company will not go bankrupt
D)ensure that business information is accurate
Q3) Which of the following would be deducted from the balance per books on a bank reconciliation?
A)Service charges
B)Outstanding checks
C)Deposits in transit
D)Notes collected by the bank
Q4) The main reason that the bank statement cash balance and the company's cash balance do not initially balance is due to timing differences.
A)True
B)False
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Chapter 8: Receivables
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145 Flashcards
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Sample Questions
Q1) Journalize the following transactions using the allowance method of accounting for uncollectible receivables.
April 1 Sold merchandise on account to Jim Dobbs,$7,200.The cost of the merchandise is $5,400.
June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.
Oct.11 Reinstated the account of Jim Dobbs and received cash in full payment.
Q2) On the balance sheet,the amount shown for the Allowance for Doubtful Accounts is equal to the
A)Uncollectible accounts expense for the year
B)total of the accounts receivables written-off during the year
C)total estimated uncollectible accounts as of the end of the year
D)sum of all accounts that are past due.
Q3) The amount of the promissory note plus the interest earned on the due date is called the
A)interest value
B)maturity value
C)face value
D)issuance value
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Page 10
Chapter 9: Fixed Assets and Intangible Assets
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) When a company replaces a component of property,plant and equipment,which statement below does not account for one of the steps in the process?
A)book value of the replaced component is written off to depreciation expense
B)the asset cost of the replaced component is credited
C)any cost to remove the old component is charged to expense
D)the identifiable direct costs associated with the new component are capitalized
Q2) Computer equipment was acquired at the beginning of the year at a cost of $57,000 that has an estimated residual value of $9,000 and an estimated useful life of 5 years.Determine the 2nd year's depreciation using straight-line depreciation.
A)$13,200
B)$19,200
C)$ 9,600
D)$ 9,000
Q3) Patents are exclusive rights to manufacture,use,or sell a particular product or process.
A)True
B)False
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Chapter 10: Current Liabilities and Payroll
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171 Verified Questions
171 Flashcards
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Sample Questions
Q1) Which of the following would be used to compute the federal income taxes to be withheld from an employee's earnings?
A)FICA tax rate
B)wage and tax statement
C)FUTA tax rate
D)wage bracket and withholding table
Q2) Assuming a 360-day year,when a $30,000,90-day,5% interest-bearing note payable matures,total payment will amount to:
A)$31,500
B)$1,500
C)$30,375
D)$375
Q3) The total net pay for a period is determined from the payroll register.
A)True
B)False
Q4) FICA tax becomes a liability to the federal government at the time an employee's payroll is prepared.
A)True
B)False
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Chapter 11: Corporations: Organization, stock Transactions, and Dividends
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169 Verified Questions
169 Flashcards
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Sample Questions
Q1) How is treasury stock shown on the balance sheet?
A)as an asset
B)as a decrease in stockholders' equity
C)as an increase in stockholders' equity
D)treasury stock is not shown on the balance sheet
Q2) On April 1,10,000 shares of $5 par common stock were issued at $22,and on April 7,5,000 shares of $50 par preferred stock were issued at $104.Journalize the entries for April 1 and 7.
Q3) Cash dividends become a liability to a corporation on the date of record.
A)True
B)False
Q4) In which section of the financial statements would Paid-In Capital from Sale of Treasury Stock be reported?
A)other expense on income statement
B)intangible asset on balance sheet
C)stockholders' equity on balance sheet
D)other income on income statement
Q5) A corporation was organized on January 1 of the current year,with an authorization of 20,000 shares of $4 preferred stock,$12 par,and 100,000 shares of $3 par common stock.
Page 13
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Chapter 12: Long-Term Liabilities: Bonds and Notes
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183 Verified Questions
183 Flashcards
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Sample Questions
Q1) The balance in Discount on Bonds Payable
A)should be reported on the balance sheet as an asset because it has a debit balance
B)should be allocated to the remaining periods for the life of the bonds by the straight-line method,if the results obtained by that method materially differ from the results that would be obtained by the interest method
C)would be added to the related bonds payable to determine the carrying amount of the bonds
D)would be subtracted from the related bonds payable on the balance sheet
Q2) The market rate of interest is affected by a variety of factors,including investors' assessment of current economic conditions.
A)True
B)False
Q3) The special fund that is set aside to provide for the payment of bonds at maturity is called a sinking fund.
A)True
B)False
Q4) (a) Prepare the journal entry to issue $100,000 bonds which sold for $94,000. (b) Prepare the journal entry to issue $100,000 bonds which sold for $104,000
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Page 14
Chapter 13: Investments and Fair Value Accounting
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) Pepito Company purchased 40% of the outstanding stock of Reyes Company on January 1,2012.Reyes reported net income of $75,000 and declared dividends of $15,000 during 2012.How much would Pepito adjust their investment in Reyes Company under the equity method?
Q2) Ramiro Company purchased 40% of the outstanding stock of Marco Company on January 1,2015.Marco reported net income of $95,000 and declared dividends of $35,000 during 2015.How much would Ramiro adjust their investment in Marco Company under the equity method?
Q3) Comprehensive income is all changes in stockholders' equity during the period except those resulting from dividends and stockholders' investments. A)True B)False
Q4) Discuss the similarities and differences in reporting trading securities,available-for-sale securities and held-to-maturity securities.
Q5) Investment in Bonds are reported on the balance sheet at lower of cost or market. A)True B)False
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Page 15
Chapter 14: Statement of Cash Flows
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) In preparing the cash flows from operating activities section of the statement of cash flows by the indirect method,the net decrease in inventories from the beginning to the end of the period is added to net income for the period.
A)True
B)False
Q2) Operating expenses other than depreciation for the year were $400,000.Prepaid expenses increased by $17,000 and accrued expenses decreased by $30,000 during the year.Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be
A)$353,000
B)$413,000
C)$447,000
D)$383,000
Q3) The statement of cash flows is an optional financial statement.
A)True
B)False
Q4) The statement of cash flows is not one of the basic financial statements.
A)True
B)False
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Chapter 15: Financial Statement Analysis
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183 Verified Questions
183 Flashcards
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Sample Questions
Q1) A clean audit opinion is the same as a qualified audit opinion.
A)True
B)False
Q2) The current ratio is
A)used to evaluate a company's liquidity and short-term debt paying ability.
B)is a solvency measure that indicated the margin of safety of a noteholder or bondholder.
C)calculated by dividing current liabilities by current assets.
D)calculated by subtracting current liabilities from current assets.
Q3) Short-term creditors are typically most interested in assessing A)marketability.
B)profitability.
C)operating results.
D)solvency.
Q4) The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis.
A)True
B)False
Q5) Define solvency and profitability.How are they alike?
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