Accounting I Practice Exam
Course Introduction
Accounting I introduces students to the fundamental principles and concepts of financial accounting. The course covers the accounting cycle, including recording transactions, adjusting entries, and preparing financial statements such as the balance sheet, income statement, and statement of cash flows. Students will learn how to analyze and interpret financial information, understand the role of accounting in decision-making, and become familiar with generally accepted accounting principles (GAAP). Through practical exercises and examples, this course lays the foundational skills necessary for further study in accounting and business.
Recommended Textbook
Cornerstones of Financial Accounting 2nd Edition by Jay Rich
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12 Chapters
1918 Verified Questions
1918 Flashcards
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Page 2
Chapter 1: Accounting and the Financial Statements
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202 Verified Questions
202 Flashcards
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Sample Questions
Q1) Which of the following best describes the term "expenses"?
A)The cost of assets used in the investing activities of a business.
B)The amount of interest or claim that the owners have in the business.
C)The future economic resources of a business entity.
D)The cost of assets used in the operations of a business.
Answer: D
Q2) When an entity's stock issuances exceed its expenses for a period of time,the entity will report net income.
A)True
B)False
Answer: False
Q3) Which one of the following is an internal user of financial information?
A)Company management
B)Governments
C)Creditors
D)Investors
Answer: A
Q4) The ability of a company to pay its debt as it comes due relates to ____________________.
Answer: liquidity
Page 3
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Chapter 2: The Accounting Information System
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Sample Questions
Q1) A list of all asset,liability,stockholders' equity,revenue,expense,and dividend accounts which are used by the company is called a(n)
A)General Ledger
B)General Journal
C)Chart of Accounts
D)Trial Balance
Answer: C
Q2) The telephone bill for the current period is received and recorded,but payment will be made later.What effect does this transaction have on the accounting equation?
A)Assets and liabilities increase.
B)Assets and contributed capital increase.
C)Liabilities increase and retained earnings decrease.
D)Assets and liabilities decrease.
Answer: C
Q3) The ____________________ is the U.S.federal government agency with the ultimate authority to determine the accounting rules for companies whose stock is sold to the public
Answer: Securities Exchange Commission or SEC
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4
Chapter 3: Accrual Accounting
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162 Flashcards
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Sample Questions
Q1) Under accrual accounting when is revenue recognized?
A)When cash is received,and expenses when cash is paid
B)When cash is received,and expenses when the costs are incurred
C)When earned,and expenses when the costs are incurred
D)When earned,and expenses when cash is paid
Answer: C
Q2) When should a shipping company recognize revenue from its delivery service?
A)On the date the customer places a order
B)On the date the customer's packages are delivered
C)On the date the invoice is mailed to the customer
D)On the date the customer's payment is received
Answer: B
Q3) The names of the four major types of adjusting entries are
,and ____________________
Answer: accrued revenues,accrued expenses,deferred revenue,deferred expense or accrued expenses,deferred revenue,deferred expense,accrued revenues or deferred revenue,deferred expense,accrued revenues,accr
Q4) The first step in the accounting cycle is to ________________ transactions.
Answer: analyze
Page 5
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Chapter 4: Internal Control and Cash
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Sample Questions
Q1) Which of the following procedures is <b>not</b> part of the preparation of a bank reconciliation for a checking account?
A)Comparing deposits listed on the bank statement to the cash account to identify deposits in transit
B)Comparing canceled checks returned with the bank statement to the cash account to identify outstanding checks
C)Looking for bank services charges and other items on the bank statement that have not yet been included in the cash account.
D)Reversing all the transactions recorded on the company's records that do not yet appear on the bank statement.
Q2) A check written by a company but not yet presented to the bank for payment is called a(n)____________________.
Q3) The stronger the system of internal control,the higher the accuracy of the company's accounting records and financial reports.
A)True
B)False
Q4) What is meant by the term "cash equivalents"?
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Chapter 5: Sales and Receivables
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Sample Questions
Q1) Special forms of factoring are called ____________________.
Q2) Gross profit divided by net sales is called the ____________________ ratio.
Q3) Refer to Academy Grill Supply.The effect on the company's financial statements on September 30,2013,is as follows:
A)Assets and Stockholders' equity increase
B)Assets and Stockholders' equity decrease
C)Assets and liabilities increase
D)No net change in assets
Q4) All American Storage Corporation sold merchandise with credit terms of 2/10,n/30,for $100,000 to a customer on January 01,2012.Nine months later,on October 1,2012 the company accepted a 12%,6-month note receivable in settlement of the account.The customer paid the maturity value of the note on the due date. Prepare the following journal entries:
A) Record the sale of merchandise Jamary \( 1,2012 \).
B) Record the receipt of the note receivable on October 1, 2012.
C) Record the adjusting entry to accrue interest on December 31 , 2012.
D) What is the due date of the note?
E) Record the collection of the note on the due date.
Q5) What is the purpose of an aging schedule for accounts receivable?
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Chapter 6: Cost of Goods Sold and Inventory
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Sample Questions
Q1) Ending inventory is equal to the cost of items on hand plus:
A)merchandise in transit sold to customers with terms FOB shipping point.
B)merchandise in transit sold to customers with terms FOB destination.
C)merchandise returned to sellers in transit with terms FOB shipping point.
D)merchandise purchased from buyers in transit with terms FOB destination.
Q2) Gools,Inc.buys designer clothing to sell in its retail stores.Since much of the merchandise comes from Europe,the company must pay freight charges.Which of the following statements must be true?
A)Transportation-in is added to the inventory account under the periodic system.
B)Transportation-in is subtracted from purchases under the periodic system.
C)Freight charges are only paid by a buyer in a periodic system.
D)Transportation-in is included in the total cost of purchases used to determine cost of goods sold in a periodic system.
Q3) Refer to the information provided for Paschal Exports.If the FIFO method of inventory costing is used,determine the following amounts:
A)Cost of goods sold for the units sold on July 10th?
B)Ending inventory on July 31st?
Q4) Cost of goods sold is equal to beginning inventory plus the net cost of purchases minus _____.
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Chapter 7: Operating Assets
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Sample Questions
Q1) Refer to Falling Leaves Lawn Care.The company is comparing the straight-line and double-declining-balance depreciation methods.Of these two methods,which method creates the larger expense and larger tax savings in 2012?
A)Straight-line depreciation creates the larger expense,while double-declining-balance depreciation creates the larger tax savings.
B)Straight-line depreciation creates both the larger expense and the larger tax savings.
C)Double-declining-balance depreciation creates both the larger expense and the larger tax savings.
D)Double-declining-balance depreciation creates the larger expense,while straight-line depreciation creates the larger tax savings.
Q2) ____________ costs are expenditures incurred in the discovery of new knowledge and the translation of research into a design or plan for a new product
Q3) On the balance sheet,a company reports plant assets by subtracting residual value from the original cost of the plant asset.
A)True
B)False
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Chapter 8: Current and Contingent Liabilities
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Sample Questions
Q1) GT Company has $200 in cash,$500 in accounts receivable,and $700 in inventory.The company also has $200 in accounts payable and $200 in unearned sales revenue.What is the company's quick ratio?
A)1.75
B)2.25
C)3.00
D)3.50
Q2) German Auto Parts is a defendant in a multi-million dollar lawsuit that was filed in a prior year.The lawsuit was not previously disclosed in the financial statements or accompanying footnotes,as the company has vigorously defended its position and its attorneys initially indicated that the claim was not valid.During the current year,however,the facts and circumstances have changed such that the likelihood of a loss approximating $5 million is now considered reasonably possible.How should the company recognize this lawsuit in its current year financial statements?
A)Do nothing,since it was not recognized in previous periods.
B)Do nothing until the matter is settled or a judgment or verdict is obtained.
C)Disclose the matter in the footnotes accompanying the financial statements.
D)Record a contingent liability in the amount of $5 million.
Q3) Why are unearned revenues considered current liabilities?
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Page 10
Chapter 9: Long-Term Liabilities
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Sample Questions
Q1) Which of the following statements regarding bonds payable is true?
A)Generally,bonds are issued in denominations of $100.
B)When an issuing company's bonds are traded in the "secondary" market,the company will receive part of the proceeds when the bonds are sold from the first purchaser to the second purchaser.
C)A debenture bond is backed by specific assets of the issuing company.
D)The interest rate in the bond contract is called the stated rate.
Q2) A company with operating income of $200,000,cash flow from operating activities of $75,000 and gross profit of $380,000,has interest payments of $25,000.What is the company's Interest Coverage Ratio (Cash Basis)?
A)4 or 4 to 1
B)3 or 3 to 1
C)15.2 or 15.2 to 1
D)2.67 or 2.67 to 1
Q3) The interest rate used to calculate interest expense in the effective interest method of amortization is equal to the market rate of interest at the time the bonds are issued.
A)True
B)False
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11
Chapter 10: Stockholders Equity
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Sample Questions
Q1) Total stockholders' equity includes $50,000 of common stock with a stated value of $0.50,and 5,000 shares of treasury stock with a total cost of $25,000.How many total shares are outstanding?
A)95,000
B)100,000
C)105,000
D)150,000
Q2) A corporate charter is sometimes called the articles of incorporation.
A)True
B)False
Q3) When is a liability for dividends created?
A)at the end of each fiscal year.
B)at the date of declaration.
C)at the date of record.
D)at the date of payment.
Q4) Shares outstanding may be less than shares issued. A)True
B)False
Q5) When a corporation issued stock to stockholders,explain the use of the account for paid-in capital in excess of par value.
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) The statement of cash flows helps users understand the reasons for the differences between net income and related cash receipts and payments.
A)True
B)False
Q2) A company reported the following information: \(\begin{array}{ll}
\text { Accounts payable, December 31,2013 } &\$ 60,000 \\
\text { Accounts payable, December 31, 2014 } &80,000 \\
\text { Inventory, December 31, 2013 } &45,000 \\
\text { Inventory, December 31, 2014 } &60,000 \\
\text { Cost of goods sold-2014 } &1,000,000
\end{array}\) Assuming all merchandise purchases were on account,how much cash was paid to suppliers for merchandise purchases during 2014?
A)$1,005,000
B)$1,050,000
C)$ 995,000
D)$1,020,000
Q3) The purchase of inventory is an important ____________________ activity for a retailer.
Q4) What is the amount of cash and cash equivalents at the end of 2014?
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) Which of the following is a measure of liquidity?
A)operating cash flows ratio
B)earnings per share
C)accounts receivable turnover ratio
D)return on common equity
Q2) The quick ratio differs from the current ratio in that it
A)represents the amount of cash on hand instead of the total current assets.
B)excludes inventories and accounts receivable from the numerator of the fraction because of obsolescence and possible collection problems.
C)is a stricter measure of a company's ability to pay its current obligations.
D)signals the need to liquidate short-term investments when it drops below 2.0.
Q3) Refer to Randstad,Inc.The dividend yield ratio for 2015 is
A)1.6%
B)1.8%
C)2.6%
D)3.0%
Q4) Public companies file their annual reports on Form ____________________.
Q5) ____________________ analysis compares a single corporation across time
Q6) Public companies file their quarterly reports on Form ____________________.
Q7) Why is liquidity important for businesses?
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