Accounting I Practice Exam
Course Introduction
Accounting I introduces students to the fundamental concepts and principles of financial accounting. The course covers the accounting cycle, including the identification, recording, and reporting of business transactions, preparation of financial statements, and analysis of accounting information. Students will learn about double-entry bookkeeping, the use of journals and ledgers, and the role of ethics in accounting. By the end of the course, students will have a solid foundation in the preparation and interpretation of key financial reports, providing a basis for further study in accounting and business.
Recommended Textbook
Financial Accounting Information for Decisions 6th Edition by John Wild
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Page 2
Chapter 1: Introducing Accounting in Business
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Sample Questions
Q1) A net loss arises when revenues exceed expenses.
A)True
B)False
Answer: False
Q2) Fast-Forward reported net income of $17,500 for the past year.At the beginning of the year the company had $200,000 in assets.By the end of the year,assets had increased to $300,000.Calculate the return on assets.
Answer: $17,500/[(200,000 + $300,000)/2] = $17,500/$250,000 = 7%
Q3) Apatha Company has assets of $600,000,liabilities of $250,000 and equity of $350,000.It buys office equipment on credit for $75,000.The effects of this transaction include:
A)Assets increase by $75,000 and expenses increase by $75,000
B)Assets increase by $75,000 and expenses decrease by $75,000
C)Liabilities increase by $75,000 and expenses decrease by $75,000
D)Assets decrease by $75,000 and expenses decrease by $75,000
E)Assets increase by $75,000 and liabilities increase by $75,000
Answer: E
Q4) ______________ is the area of accounting aimed at serving external users.
Answer: Financial accounting
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Chapter 2: Analyzing and Recording Transactions
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Sample Questions
Q1) A general journal is:
A)A ledger in which amounts are posted from a balance column account
B)Not required if T-accounts are used
C)A complete record of each transaction in the place from which transaction amounts are posted to the ledger accounts
D)Not necessary in electronic accounting systems
E)A book of final entry because financial statements are prepared from it
Answer: C
Q2) Accountants at Amalgamated Corporation incorrectly journalized a $50,000 equipment purchase as a debit to Buildings.This error was not discovered before the journal entry was posted.What is the correcting entry?
A)Debit Buildings and Credit Equipment for $50,000 each
B)Debit Equipment and Credit Buildings for $50,000 each
C)Debit Buildings and Credit Equipment for $100,000 each
D)Debit Equipment and Credit Buildings for $100,000 each
E)Debit Equipment for $100,000 and Credit Buildings for $50,000
Answer: B
Q3) Revenues and expenses are two categories of ____________________ accounts.
Answer: Equity
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Chapter 3: Adjusting Accounts and Preparing Financial Statements
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Sample Questions
Q1) Which of the following accounts would not be on the post closing trial balance?
A)Accounts Payable
B)Accounts Receivable
C)Common Stock
D)Dividends
E)Retained Earnings
Answer: D
Q2) The accrual basis of accounting is an accounting system in which revenues are reported as earned when cash is received.
A)True
B)False Answer: False
Q3) A company's fiscal year must correspond with the calendar year.
A)True
B)False Answer: False
Q4) If a prepaid expense account were not adjusted for the amount used,on the balance sheet assets would be _______________ and equity would be __________.
Answer: Overstated,overstated
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Chapter 4: Reporting and Analyzing Merchandising Operations
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Sample Questions
Q1) Alpha Company had cash sales of $94,275,credit sales of $83,450,sales returns and allowances of $1,700 and sales discounts of $3,475.Alpha's net sales for this period equal:
A)$94,275
B)$172,550
C)$174,250
D)$176,025
E)$177,725
Q2) A period's ___________________ becomes the next period's beginning inventory.
Q3) The acid-test ratio reflects the ___________ of a company.
Q4) Scuba Company had net income on the current year's income statement in the amount of $800,000,other expense in the amount of $400,000 and a gross profit ratio of 58%,what was the amount of net sales on the income statement?
Q5) The periodic inventory system uses a temporary account called Purchases.
A)True B)False
Q6) In a periodic inventory system,cost of goods sold is recorded as each sale occurs.
A)True B)False
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Chapter 5: Reporting and Analyzing Inventories
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Sample Questions
Q1) Goods on consignment are goods shipped by their owner,called the consignee,to another party called the consignor.
A)True
B)False
Q2) Given the following information,determine the cost of goods sold for December 31 using the FIFO perpetual inventory method.
December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 11: 12 units were sold at $35 per unit
December 15: 20 units were purchased at $10.15 per unit
December 22: 18 units were sold at $35 per unit
A)$282.15
B)$332.10
C)$281.25
D)$290.70
E)$210.30
Q3) Describe the internal controls that must be applied when taking a physical count of inventory.
Q4) Identify and describe the four inventory valuation methods.
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Chapter 6: Reporting and Analyzing Cash and Internal Controls
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Sample Questions
Q1) The voucher register is a journal that is used to record all approved vouchers within the company.
A)True
B)False
Q2) An NSF check for $17.50 would be recorded as a debit to Cash and a credit to Accounts Receivable.
A)True
B)False
Q3) Two limitations of internal control systems are ____________________ and ________________.
Q4) Triple Company's accountant made an entry that included the following items: debit postage expense $12.42; debit office supplies expense $27.33,credit to cash over/short
$2.19.If the original amount in petty cash is $320,how much was the credit to cash for the reimbursement?
A)$320.00
Chapter 7: Reporting and Analyzing Receivables
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Sample Questions
Q1) When the maker of a note is unable or refuses to pay at maturity,the note is said to be ___________________.
Q2) Companies can report a credit card expense as a discount deducted from sales or as a selling expense.
A)True
B)False
Q3) ____________________ is the charge for using (not paying)money until a later date.
Q4) Companies follow both the matching principle and the materiality principle when applying the direct write-off method.
A)True
B)False
Q5) Writing off an uncollectible account receivable when the allowance method of accounting for uncollectible accounts is used,a company should debit _______________________ and credit accounts receivable.
Q6) A ____________________ is a signed promise to pay a specified amount of money either on demand or at a definite future date.
Q7) The person to whom a note is payable to is known as the ______________.
Page 9
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Chapter 8: Reporting and Analyzing Long-Term Assets
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Sample Questions
Q1) A company purchased and installed a machine on January 1,2006 at a total cost of $72,000.Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value.The machine was disposed of on July 1,2010.
1.Prepare the general journal entry to update depreciation to July 1,2010.
2.Prepare the general journal entry to record the disposal of the machine under each of these three independent situations:
a. The machine was sold for $22,000 cash
b. The machine was sold for $15,000 cash
c. The machine was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash
Q2) A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.The depletion expense per ton of ore is:
A)$0.75
B)$0.625
C)$0.875
D)$6.00
E)$8.00
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10
Chapter 9: Reporting and Analyzing Current Liabilities
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Sample Questions
Q1) Current liabilities are obligations not due within one year or the company's operating cycle,whichever is longer.
A)True
B)False
Q2) For the year ended December 31,2010,Mason Company has implemented an employee bonus program equal to 7% of Mason's net income,which employees will share equally.Mason's net income (pre-bonus)is expected to be $3,500,000,and bonus expense is deducted in computing net income.What is the amount that needs to be recorded for estimated bonus liability for 2010?
A)$245,000
B)$144,118
C)$228,972
D)$50,000
E)$125,000
Q3) Companies with many employees often use a special ____________________ account to pay employees.
Q4) Vacation benefits are a type of _______________ liability.
Q5) Identify the types of payroll records prepared for each pay period and each employee.
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Chapter 10: Reporting and Analyzing Long-Term Liabilities
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Sample Questions
Q1) A company issued 9.2%,10-year bonds with a par value of $100,000.Interest is paid semiannually.The market interest rate on the issue date was 10% and the issuer received $95,016 cash for the bonds.On the first semiannual interest date,what amount of cash should be paid to the holders of these bonds for interest?
Q2) A company issued 9.2%,10-year bonds with a par value of $100,000.Interest is paid semiannually.The market interest rate on the issue date was 10% and the issuer received $95,016 cash for the bonds.The issuer uses the effective interest method for amortization.On the first semiannual interest date,what amount of discount should issuer amortize?
Q3) _____________________ bonds can be exchanged for a fixed number of shares of the issuing corporation's common stock.
Q4) Explain the present value concept and how it applies to long-term liabilities.
Q5) Two common ways of retiring bonds before maturity are to (1)exercise a call option or (2)purchase them on the open market. A)True B)False
Q6) The process of systematically reducing a bond discount to zero over the life of the bond is called ______________________________.
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Chapter 11: Reporting and Analyzing Equity
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Sample Questions
Q1) _______________________________ is the total amount of cash and other assets received by the corporation from its stockholders in exchange for common stock.
Q2) Explain the preparation of journal entries to record the issuance of par value,stated value and no-par value common stock.
Q3) A corporation reported net income of $3,730,000 and paid preferred cash dividends of $100,000 during the current year.There were 600,000 shares of common stock outstanding and the market price per common share was $88.33 at year-end.Calculate the company's price-earnings ratio.
Q4) On July 31,a company declared a cash dividend of $0.25 per common share to the shareholders of record on August 15.The cash dividend will be paid on August 25.This company has 500,000 shares authorized and 100,000 shares outstanding.Prepare the journal entries required on July 31,August 15 and August 25.
Q5) _________________ is a corporation's own stock that has been reacquired.
Q6) A corporation is responsible for its; own acts and debts as the corporation is considered a ____________________________________.
Q7) _____________________ is the price at which a stock is bought and sold.
Q8) What are the rights generally granted to common stockholders?
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Chapter 12: Reporting and Analyzing Cash Flows
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Sample Questions
Q1) The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is:
A)Operating activities
B)Financing activities
C)Investing activities
D)Schedule of noncash investing or financing activity
E)None of these as this is not reported on the statement of cash flows
Q2) The use of a spreadsheet for analysis is especially useful when preparing the statement of cash flows using the _____________ method.
Q3) Information to prepare the statement of cash flows usually comes from (a)comparative balance sheets, (b)current income statement and (c)additional information.
A)True
B)False
Q4) Information to prepare the statement of cash flows usually comes from three sources: (1)__________________________, (2)_______________________ and (3)____________________.
Q5) Define and discuss the differences between operating,investing and financing activities.
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Chapter 13: Analyzing and Interpreting Financial Statements
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Sample Questions
Q1) The ability to meet short-term obligations and to efficiently generate revenues is called:
A)Liquidity and efficiency
B)Solvency
C)Profitability
D)Market prospects
E)Creditworthiness
Q2) An advantage of common-size statements is that they reflect the relative sizes of different companies under analysis.
A)True
B)False
Q3) A company has a profit margin of 12%.If net income is equal to $450,000 and average total asset is equal to $600,500,how much are sales?
A)$1,050,500
B)$126,060
C)$72,060
D)$54,000
E)$3,750,000
Q4) Explain the form and content of a complete income statement.
Page 15
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Chapter 14: Investments and International Operations
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Sample Questions
Q1) Haladam Company had the following transactions relating to investments in trading securities during the year.Prepare the required general journal entries for these transactions.
May 4 Haladam purchased 600 shares of Cob Company stock at \( \$ 120 \) per share plus a \( \$ 750 \) brokerage fee.
July 1 Haladam received a \$2.50 per share cash dividend on the Cob Company stock. Sept. 15 Sold 300 shares of the Cob Company stock for \( \$ 125 \) per share, less a \( \$ 450 \) brokerage fee.
Dec. 31 The market value of the Cob Company stock (the only investment that Haladam owns) is \$124 per share. The balance of the Market Adjustment - Trading a zero balance prior to adjustment.
Q2) On April 1 of the current year,a company paid $150,000 to purchase 7%,10-year bonds that had a par value of $150,000 and paid interest semiannually on October 1 and April 1.The company intends to hold the bonds until they mature.Prepare the journal entry to record the receipt of the semiannual interest payment on April 1 of the following year.
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Chapter 15: Reporting and Analyzing Partnerships
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Sample Questions
Q1) ___________________________ implies that each partner in a partnership can be called on to pay a partnership's debts.
Q2) When a partner is added to a partnership:
A)The previous partnership ends
B)The underlying business operations ends
C)The underlying business operations must close and then re-open
D)The partnership must continue
E)The partnership equity always increases
Q3) Partnership accounting:
A)Is the same as accounting for a sole proprietorship
B)Is the same as accounting for a corporation
C)Is the same as accounting for a sole proprietorship,except that separate capital and withdrawal accounts are kept for each partner
D)Is the same as accounting for an S corporation
E)Is the same as accounting for a corporation,except that retained earnings is used to keep track of partners' withdrawals
Q4) When a partner leaves a partnership,the present partnership ends.
A)True
B)False
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Chapter 16: Reporting and Preparing Special Journals
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Sample Questions
Q1) The compatibility principle requires that an accounting system report useful,understandable,timely and pertinent information for effective decision making.
A)True
B)False
Q2) The accounting principle that requires an accounting information system to report useful,understandable,timely and pertinent information for effective decision-making is the:
A)Control principle
B)Compatibility principle
C)Relevance principle
D)Flexibility principle
E)Cost-Benefit principle
Q3) Posting debits from the Sales journal to Accounts Receivable twice - once to the general ledger account Accounts Receivable and once to the customer's subsidiary account - violates the accounting equation of debits equal credits.
A)True
B)False
Q4) Describe the posting process for special journals.
Q5) What is the segment return on assets ratio? What is it used for?
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