Accounting I Question Bank
Course Introduction
Accounting I introduces students to the fundamental principles and concepts of financial accounting. The course covers the accounting cycle, including the recording, summarizing, and reporting of business transactions, using generally accepted accounting principles (GAAP). Students learn to prepare and analyze basic financial statements such as the balance sheet, income statement, and statement of cash flows. The course emphasizes the importance of ethical practices, understanding the role of accounting in decision-making, and applying accounting techniques to real-world business scenarios. This foundational knowledge serves as the basis for more advanced studies in accounting and finance.
Recommended Textbook
Fundamental Financial Accounting Concepts 9th Edition by Thomas P Edmonds
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13 Chapters
1874 Verified Questions
1874 Flashcards
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Page 2
Chapter 1: An Introduction to Accounting
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) In which section of a statement of cash flows would the payment of cash dividends be reported?
A)Investing activities.
B)Operating activities.
C)Financing activities.
D)Dividends are not reported on the statement of cash flows.
Answer: C
Q2) Turner Company reported assets of $20,000 (including cash of $9,000),liabilities of $8,000,common stock of $7,000,and retained earnings of $5,000.Based on this information,what can be concluded?
A)25% of Turner's assets are the result of prior earnings.
B)$5,000 is the maximum dividend that can be paid to shareholders.
C)40% of Turner's assets are the result of borrowing from creditors.
D)25% of Turner's assets are from prior earnings,$5,000 is the maximum possible dividend, and 40% of assets are the result of borrowed resources.
Answer: D
Q3) Give three examples of asset use transactions.
Answer: Paid loan,paid expense,and paid dividends to stockholders.
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Chapter 2: Understanding the Accounting Cycle
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) Sometimes the recognition of revenue is accompanied by an increase in liabilities. A)True
B)False
Answer: False
Q2) After closing,all income statement accounts have non-zero balances.
A)True
B)False
Answer: False
Q3) What is the "fraud triangle"?
Answer: Auditors have identified three elements that are commonly present in instances of criminal and ethical misconduct.These three elements are often shown in the form of a triangle.The first of these elements is the availability of opportunity without which fraud could not exist.Therefore,opportunity is at the top of the triangle.The second element is the existence of some kind of pressure leading to an incentive.The third element is the capacity to rationalize the behavior.
Q4) What effect does the recording of revenue normally have on total assets?
Answer: The recording of revenue normally has the effect of increasing total assets (usually cash or accounts receivable).
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4
Chapter 3: The Double-Entry Accounting System
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157 Verified Questions
157 Flashcards
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Sample Questions
Q1) The debt-to-assets ratio for Wichita is:
A)5%.
B)10%.
C)45%.
D)50%.
Answer: D
Q2) Which company has the highest level of debt risk?
A)Grumpy
B)Happy
C)Doc
D)They all have equal debt risk
Answer: A
Q3) A high value of the debt to asset ratio may indicate that a company has a high level of debt risk.
A)True
B)False
Answer: True
Q4) What is the purpose of a trial balance?
Answer: To ensure that debits and credits are equal.
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Chapter 4: Accounting for Merchandising Businesses
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Give three examples of a period cost.At what time are period costs recognized as expenses?
Q2) A discount given to encourage prompt payment is called:
A)a cash discount.
B)a sales discount by the seller.
C)a purchase discount by the buyer.
D)all of these answer choices are correct.
Q3) With a perpetual inventory system,the cost of merchandise inventory is recognized at the time of purchase.
A)True
B)False
Q4) A multistep income statement separates routine operating results from peripheral or nonoperating items.
A)True
B)False
Q5) What is a common size income statement? Explain how a common size income statement is useful to financial statement users.
Q6) Why are cash discounts given,who benefits by these discounts,and what are the benefits of those discounts?
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Chapter 5: Accounting for Inventories
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134 Flashcards
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Sample Questions
Q1) A discount merchandiser is likely to have a higher inventory turnover than more upscale stores with higher merchandise prices.
A)True
B)False
Q2) Determine the amount of cost of goods sold assuming the LIFO cost flow method.
A)$4,100
B)$4,320
C)$2,360
D)$3,600
Q3) Melbourne Company uses the perpetual inventory method.Melbourne purchased 500 units of inventory that cost $4.00 each.At a later date the company purchased an additional 600 units of inventory that cost $5.00 each.If Melboune uses a LIFO cost flow method,and sells 800 units of inventory,the amount of ending inventory appearing on the balance sheet will be:
A)$3,800.
B)$1.350.
C)$1,500.
D)$1,200.
Q4) Explain the computation of and the significance of inventory turnover.
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Chapter 6: Internal Control and Accounting for Cash
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141 Flashcards
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Sample Questions
Q1) A credit balance in Cash Short and Over represents a shortage of cash and would be treated as an expense.
A)True
B)False
Q2) When a "debit memo" is included in a bank statement,what effect does that have on the cash balance?
Q3) Which of the item(s)would be subtracted from the company's unadjusted book balance to determine the true cash balance?
A)Item numbers 2 and 4.
B)Item numbers 2,4,and 5.
C)Item numbers 1 and 4.
D)Item numbers 1,2,4,and 5.
Q4) Explain the meaning of "internal control" and distinguish between administrative controls and accounting controls.
Q5) The entry to replenish a petty cash fund includes:
A)A credit to Cash.
B)A credit to Petty Cash.
C)Credits to expenses.
D)A debit to Cash.
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Chapter 7: Accounting for Receivables
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Sample Questions
Q1) The best estimate for the amount of cash a company expects to collect from its accounts receivable is the face value of the receivables.
A)True
B)False
Q2) The net realizable value of accounts receivable decreases when an account receivable is written off.
A)True B)False
Q3) Allegheny Company ended 2015 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $23,000 and $900,respectively.During 2016,Allegheny wrote off $1,500 of Uncollectible Accounts.After aging its receivables,Allegheny estimates that the ending Allowance for Doubtful Accounts balance should be $1,600.What will Allegheny report as Uncollectible Accounts Expense on its 2016 income statement?
A)$2,200
B)$1,500
C)$700
D)$1,600
Q4) Explain the computation of the length of the operating cycle.
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Page 9
Chapter 8: Accounting for Long-Term Operational Assets
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Sample Questions
Q1) When using the modified accelerated cost recovery system (MACRS)the highest amount of depreciation expense will be recognized in the year the asset is acquired.
A)True
B)False
Q2) At the end of the current accounting period,Ringgold Co.recorded depreciation of $15,000 on its equipment.The effect of this entry on the company's balance sheet is to:
A)decrease assets and increase liabilities.
B)decrease owners' equity and decrease assets.
C)decrease assets and increase owners' equity.
D)decrease owners' equity and increase liabilities.
Q3) If a business chooses to use the straight-line method for tax purposes,how will this affect income tax in the first year of an asset's life,compared to MACRS?
Q4) The term used to recognize expense for property,plant,and equipment assets is depletion.
A)True
B)False
Q5) Explain how the gain or loss is computed on the sale of a piece of equipment.
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Page 10
Chapter 9: Accounting for Current Liabilities and Payroll
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Sample Questions
Q1) On October 1,2015,Harrison Company borrowed money by issuing a $24,000 face value discount note to its bank.The note had an 8% discount rate and had a term of 1 year.On December 31,2015,Harrison should accrue interest expense in the amount of $1,920.
A)True
B)False
Q2) If a company is located in an area where floods or earthquakes are deemed to be possible,the company should record a contingent liability.
A)True
B)False
Q3) The carrying value of the liability appearing on the December 31,2016 balance sheet will amount to:
A)$80,400
B)$87,600
C)$90,000
D)$88,800
Q4) Independent contractors must be individuals who are employed by another company.
A)True
B)False
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Chapter 10: Accounting for Long-Term Debt
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157 Flashcards
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Sample Questions
Q1) Currie Company borrowed $20,000 from the Sierra Bank by issuing a 10% three-year note.Currie agreed to repay the principal and interest by making annual payments in the amount of $8,042.Based on this information,the amount of the interest expense associated with the second payment would be: (round your answer to the nearest dollar)
A)$730.
B)$1,396.
C)$2,000.
D)$8,042.
Q2) The times-interest-earned ratio is calculated by which of the following?
A)Total assets divided by interest expense.
B)Net income divided by interest expense.
C)Earnings before interest and taxes divided by interest expense.
D)None of these answer choices is correct.
Q3) Discuss the purpose of a sinking fund.
Q4) If a bond is sold at 101,its stated rate of interest would be:
A)equal to the market rate.
B)unrelated to the market rate.
C)higher than the market rate.
D)lower than the market rate.
Page 12
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Chapter 11: Proprietorships,partnerships,and Corporations
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Sample Questions
Q1) A sole proprietorship was formed on January 1,2016,when it received $90,000 cash from Kaitlyn Conrad,the owner.During 2016,the business earned $138,000 in cash revenues and paid $102,400 in cash expenses.Conrad withdrew $16,000 in cash during the year.
Required: Prepare an income statement,capital statement,balance sheet,and statement of cash flows for the 2016 fiscal year.
Q2) Franklin Corporation reported net income of $75,000 in 2016.The company had 100,000 shares of $12 par value common stock outstanding and a market price of $18 per share.Franklin's price-earnings ratio was
A)2.4:1
B)24:1
C)16.6:1
D)1.5:1
Q3) Describe the varying degrees to which closely held corporations and publicly traded corporations are regulated.
Q4) The PCAOB was established in response to the accounting scandals that occurred in 2001 and 2002.
A)True
B)False
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Chapter 12: Statement of Cash Flows
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129 Flashcards
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Sample Questions
Q1) Which method of preparing the operating activities section of a cash flow statement is recommended by the Financial Accounting Standards Board?
Q2) What is the major advantage of using the direct method of preparing the operating activities section of the statement of cash flows?
Q3) The LaPage Corporation reported a beginning balance of $2,200 in its Prepaid Insurance account for 2016.During the year,a total of $17,000 was recognized as Insurance Expense and the Prepaid Insurance account had an ending balance of $1,800.How much cash did LaPage pay for insurance during 2016?
A)$16,600
B)$17,400
C)$17,000
D)$18,800
Q4) Which of the following would not be presented in the financing section of the statement of cash flows?
A)Purchased a new office building by issuing a note payable.
B)Purchased treasury stock.
C)Repayment of long-term bonds payable.
D)Issuing of preferred stock.
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Page 14
Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) The Monticello Company reported gross sales of $800,000,sales returns and allowances of $5,000 and sales discounts of $10,000.The company has total average assets of $500,000,of which $250,000 is property,plant,and equipment.What is the company's asset turnover ratio?
A)3,14 times
B)1.57 times
C)1.60 times
D)0.64 times
Q2) Which ratios measure a company's long-term debt paying ability and its financing structure?
A)Profitability
B)Solvency
C)Liquidity
D)None of these answer choices are correct.
Q3) Describe the factors involved in communicating useful financial information.
Q4) The only requirement involved in communicating useful information is that the information be accurate.
A)True
B)False
Q5) Discuss the limitations that affect financial statement analysis.
Page 15
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