Accounting I Review Questions
Course Introduction
Accounting I introduces students to the fundamental concepts and principles of financial accounting. The course covers the basic accounting cycle, including the identification, recording, and communication of financial transactions for service and merchandising businesses. Students will learn how to prepare and interpret financial statements such as the balance sheet, income statement, and statement of owners equity. Emphasis is placed on the use of generally accepted accounting principles (GAAP), ethical considerations in financial reporting, and the role of accounting in decision-making. This foundational course is essential for anyone pursuing further studies or a career in business and finance.
Recommended Textbook
Financial Accounting 4th Edition by Robert Kemp
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12 Chapters
1893 Verified Questions
1893 Flashcards
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Page 2
Chapter 1: Business, Accounting, and You
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) Business owners are paid interest on the money they have invested in the business.
A)True
B)False
Answer: False
Q2) Which of the following types of organizations would produce goods?
A)Merchandising business
B)Service business
C)Manufacturing business
D)Both merchandising and manufacturing businesses produce goods.
Answer: C
Q3) Which of the following business forms is similar to a corporation in regard to owner liability?
A)All businesses are the same with regard to owner liability.
B)Limited liability company
C)Sole proprietorship
D)Partnership
Answer: B
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Chapter 2: Analyzing and Recording Business Transactions
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152 Flashcards
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Sample Questions
Q1) Cash, Common Stock, and Advertising Expense have normal balances of:
A)credit, credit, and credit, respectively.
B)debit, credit, and debit, respectively.
C)debit, debit, and credit, respectively.
D)credit, debit, and debit, respectively.
Answer: B
Q2) The account "Cash" began with a zero balance and then had the following changes: increase of $280, decrease of $90, increase of $125 and a decrease of $40. The final balance is a:
A)debit balance of $275.
B)credit balance of $275.
C)debit balance of $405.
D)credit balance of $130.
Answer: A
Q3) An account starting with a number 1 would indicate:
A)an asset.
B)Stockholders' Equity.
C)a revenue.
D)a liability.
Answer: A
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Chapter 3: Adjusting and Closing Entries
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Sample Questions
Q1) The total dollars in an Accumulated Depreciation account are:
A)added to the corresponding asset account.
B)divided into the corresponding asset account.
C)subtracted from the corresponding asset account.
D)subtracted from the corresponding liability account.
Answer: C
Q2) The Statement of Retained Earnings that is prepared from the adjusted trial balance begins with the:
A)first stock account listed on the adjusted trial balance.
B)Retained Earnings balance on the adjusted trial balance.
C)first dividend account listed on the adjusted trial balance.
D)net income listed on the adjusted trial balance.
Answer: B
Q3) The matching principle in accounting requires the matching of:
A)revenue earned with the assets used to produce the revenue.
B)revenue earned with the assets used less the liabilities incurred.
C)revenue earned with the liabilities used to produce the revenue.
D)revenue earned with the expenses incurred to produce the revenue.
Answer: D
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Page 5
Chapter 4: Accounting for a Merchandising Business
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Sample Questions
Q1) Greene Company purchases $8,000 of inventory with shipping terms, FOB Columbus. Greene is based in Dayton and the supplier is based in Columbus. The shipping costs are $450. What is the cost of Greene's inventory?
A)$8,000
B)$8,450
C)Either $8,000 or $8,450 is an acceptable amount to assign to inventory cost under GAAP.
D)There is not enough information to calculate inventory cost.
Q2) If an invoice reads 2/15, n/30, the 15 refers to the percent that can be taken for the discount.
A)True
B)False
Q3) Most businesses today use the periodic inventory method. A)True
B)False
Q4) The Statement of Retained Earnings for a merchandiser is prepared differently than that of a service business.
A)True
B)False
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Chapter 5: Inventory
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Sample Questions
Q1) The inventory system whereby the merchandise inventory account balance is merely a record of the most recent physical inventory count is called the:
A)periodic system.
B)perpetual system.
C)LIFO system.
D)FIFO system.
Q2) Companies that want a "middle ground" solution to net income and the amount of income taxes that the company will pay will value their inventory at: A)FIFO.
B)LIFO.
C)average cost.
D)specific identification.
Q3) A manufacturer uses ________ inventory to produce the goods it sells.
A)raw materials
B)purchases
C)finished goods
D)work-in-process
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Chapter 6: The Challenges of Accounting: Standards,
Internal Control, Audits, Fraud, and Ethics
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Sample Questions
Q1) If an employee has a low incentive to commit fraud, the employee does NOT have:
A)realization.
B)perceived opportunity.
C)rationalization.
D)perceived pressure.
Q2) Which of the following would NOT be considered part of monitoring in an internal control system?
A)Having an audit trail
B)Assessing performance of the system
C)Locating weakness of the system
D)Management involvement
Q3) The goal of overstating earnings by using fraud is to:
A)deflate the amount of taxes the corporation pays.
B)overstate the cost of goods sold.
C)help increase the stock price of the company.
D)overstate receivables.
Q4) IFRS is considered a principles-based system, while U.S. GAAP is considered a rules-based system.
A)True
B)False
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Chapter 7: Cash and Receivables
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Sample Questions
Q1) The entity that signs the note and promises to pay the required amount is referred to as:
A)maker of a note
B)payee of a note
C)debtor
D)both A and C
Q2) Using a 360-day year, the maturity value of a 60-day note for $5,000 at 8% annual interest is $67.
A)True
B)False
Q3) Cash consists of anything that a bank will take as a deposit.
A)True
B)False
Q4) A 135-day note issued on May 17 will mature on:
A)September 28.
B)September 29.
C)September 30.
D)October 1.
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Chapter 8: Long-Term and Other Assets
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Sample Questions
Q1) When a company buys a building, realtor commissions are NOT included in the cost of the building.
A)True
B)False
Q2) Which of the following marketable securities are reported at market value on the Balance Sheet date?
A)Held-to-maturities securities
B)Available-for-sale securities
C)Trading securities
D)Available-for-sale and trading securities
Q3) It is determined that a computer's depreciation expense for the year is $3,500. The journal entry to record this will be:
A)debit Depreciation Expense - computer $3,500; credit Cash $3,500.
B)debit Accumulated Depreciation - computer $3,500; credit Cash $3,500.
C)debit Depreciation Expense - computer $3,500; credit Accumulated Depreciation, $3,500.
D)debit Cash $3,500; credit Depreciation Expense - computer $3,500.
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Chapter 9: Current Liabilities and Long-Term Debt
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Sample Questions
Q1) When a liability exists, the amount owed is always known.
A)True
B)False
Q2) The debt ratio is an indicator of a company's ability to incur more debt.
A)True
B)False
Q3) The debt ratio is an indicator of a company's profitability.
A)True
B)False
Q4) Which of the following would be a required payroll tax for both the employee and the employer?
A)Federal income tax
B)FICA
C)FUTA
D)SUTA
Q5) Bonds that mature all at the same time are:
A)serial bonds.
B)term bonds.
C)secured bonds.
D)callable bonds.
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Chapter 10: Corporations: Paid-In Capital and Retained Earnings
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Sample Questions
Q1) A 2-for-1 stock split will:
A)double the number of shares of stock and double the par value per share.
B)double the number of shares of stock and halve the par value per share.
C)halve the number of shares of stock and halve the par value per share.
D)halve the number of shares of stock and double the par value per share.
Q2) The entry to record selling 400 shares of $28 stated value common stock for $44 per share would include:
A)debiting Common Stock for $17,600.
B)crediting Cash for $17,600.
C)crediting Paid-in Capital in Excess of Stated Value for $6,400.
D)debiting Paid-in Capital in Excess of Stated Value for $6,400.
Q3) Mike's Motors has 220,000 shares of $6-par common stock outstanding. They have declared a 10% stock dividend. The current market price of the common stock is $14/share. The amount that will be credited to Common Stock on the date of declaration is:
A)$132,000.
B)$440,000.
C)$308,000.
D)$184,800.
Page 12
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) When comparing net cash provided by operations using the direct method versus indirect method, we find that:
A)net cash is higher using the indirect method.
B)net cash is lower using the indirect method.
C)there is no difference in the net cash between the two methods.
D)Depreciation Expense is used in the direct method.
Q2) Free cash flow is the anticipated amount of cash available from operations after paying for planned financing of stock and paying dividends.
A)True
B)False
Q3) Aspen Corp. sold an asset with a book value of $58,000 for $31,000 cash. Which of the following is a TRUE statement?
A)Loss on sale equals $31,000 and Cash inflow equals $31,000.
B)Loss on sale equals $58,000 and Cash inflow equals $58,000.
C)Loss on sale equals $27,000 and Cash inflow equals $31,000.
D)Loss on sale equals $31,000 and Cash inflow equals $27,000.
Q4) Cash received from the sale of land would be included in financing activities.
A)True
B)False
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) The net working capital for a company with current assets of $77,000, quick assets of $46,000, total assets of $187,000 current liabilities of $65,000 and net sales of $91,000 would be:
A)$58,000.
B)$26,000.
C)$12,000.
D)$122,000.
Q2) The economic environment of a business describes how a business is affected by competitors.
A)True
B)False
Q3) Return on equity measures the relationship between net income and average total assets.
A)True
B)False
Q4) Market analysis ratios are used to determine if the business is:
A)Investing its money and using its assets efficiently
B)Earning a net income or loss
C)Generating enough net income to reward stockholders for use of their money
D)Paying off its debts in a reasonable time frame
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