Accounting I Test Questions
Course Introduction
Accounting I introduces students to the foundational principles and practices of financial accounting. The course covers core topics such as the accounting cycle, preparation and analysis of financial statements, and the recording of business transactions. Students will learn about the principles of double-entry bookkeeping, the use of journals and ledgers, and the application of Generally Accepted Accounting Principles (GAAP). Emphasis is placed on understanding the role of accounting in business operations, interpreting financial data, and ensuring accuracy in reporting. This course provides a solid basis for further study in accounting and equips students with essential skills for managing financial information in various organizational settings.
Recommended Textbook
Financial Accounting 9th Edition by Walter T. Harrison
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13 Chapters
2240 Verified Questions
2240 Flashcards
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Chapter 1: The Financial Statements
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Sample Questions
Q1) The stable monetary unit concept means that the type of currency used for the financial statements is NOT expected to change.
A)True
B)False
Answer: False
Q2) Liabilities are divided into two categories:
A) current and payable.
B) current and future.
C) accounts payable and long-term.
D) current and long-term.
Answer: D
Q3) The basic component of paid-in capital is common stock.
A)True
B)False
Answer: True
Q4) Accounting produces financial statements, which report information about a business entity.
A)True
B)False
Answer: True
Page 3
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Chapter 2: Transaction Analysis
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Sample Questions
Q1) If a company buys inventory on account:
A) cash would decrease.
B) accounts payable would increase.
C) net income would increase.
D) common Stock would decrease.
Answer: B
Q2) Business managers must often make decisions without the benefit of a complete accounting system.
A)True
B)False
Answer: True
Q3) Which of the following is NOT a business transaction?
A) The company sells goods on account.
B) The company buys land for cash.
C) The company is featured in a magazine article.
D) The company sells stock for cash.
Answer: C
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Page 4
Chapter 3: Accrual Accounting Income
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Sample Questions
Q1) Accrued revenues have been recorded and need adjusting, while deferred revenues have never been recorded before the adjusting process.
A)True
B)False
Answer: False
Q2) The matching principle matches cash receipts and cash disbursements.
A)True
B)False
Answer: False
Q3) Which of the following combinations of ratios is preferable?
A) A low current ratio and a high debt ratio
B) A high current ratio and a low debt ratio
C) A low current ratio and a low debt ratio
D) A high current ratio and a high debt ratio
Answer: B
Q4) The book value of a plant asset is equal to its cost plus any improvements made to the asset.
A)True
B)False
Answer: False
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Chapter 4: Internal Control Cash
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Sample Questions
Q1) The Toy Store borrowed $12,000 from the bank and agreed to keep $3,000 on deposit at all times. The net result of this compensating balance agreement is that:
A) the Toy Store actually only borrowed $9,000.
B) the Toy Store actually only borrowed $3,000.
C) the actual interest rate is lower than the stated interest rate.
D) none of the above are true.
Q2) A company's comparisons and compliance monitoring:
A) should include cash budgets, which are the budgets of future period's net income.
B) can contain "rolling" budgets which are constantly updated .
C) should include internal auditors who are completely independent of the business. D) should contain adequate hiring practices.
Q3) All of the following will appear on the bank statement EXCEPT for:
A) Electronic funds transfers (EFT).
B) beginning and ending cash balance.
C) cash receipts and cash payments.
D) deposits in transit.
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Chapter 5: Short-Term Investments Receivables
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Sample Questions
Q1) If Extol's Inc. sells items to a customer who uses a credit card for $800, and there is a credit card fee of 2%, what is the amount of the debit to Cash?
A) $816
B) $800
C) $784
D) $768
Q2) Crazy Foods, Inc., factors its receivables to Shady Factoring Company. The effect of this transaction is:
A) Shady Factoring will earn revenue on the transaction.
B) Crazy Foods will retain control over the receivables.
C) Shady Factoring will recognize a factoring expense on the transaction.
D) Crazy Foods will receive cash equal to the face value of the receivables.
Q3) Fair value is the amount for which the securities can be sold.
A)True
B)False
Q4) Accepting credit cards can increase revenue for a company, but the added revenue comes at a cost.
A)True
B)False
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Chapter 6: Inventory Cost of Goods Sold
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Sample Questions
Q1) When inventory costs are increasing and there has been no LIFO liquidation:
A) FIFO cost of goods sold will be higher than LIFO cost of goods sold.
B) FIFO ending inventory will be lower than LIFO ending inventory.
C) FIFO cost of goods sold will be lower than LIFO cost of goods sold.
D) FIFO and LIFO will result in the same cost of goods sold and ending inventory.
Q2) Company A has inventory out on consignment and held for sale by Company B.
Which Company will include the goods in their inventory?
A) Company A
B) Company B
C) Either Company A or Company B
D) Cannot be determined from the facts
Q3) When comparing the results of LIFO and FIFO when inventory costs are decreasing:
A) cost of goods sold will be the lowest using FIFO.
B) ending inventory will be the highest using FIFO.
C) cost of goods sold will be the highest using LIFO.
D) ending inventory will be the highest using LIFO.
Q4) Inventory is an asset and cost of goods sold is an expense.
A)True
B)False
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Chapter 7: Plant Assets, Natural Resources, Intangibles
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Sample Questions
Q1) Jackson Corporation acquired equipment on January 1, 2010, for $320,000. The equipment had an estimated useful life of 10 years and an estimated salvage value of $25,000. On January 1, 2013, Jackson Corporation revised the total useful life of the equipment to 6 years and the estimated salvage value to be $20,000. Using the straight-line method of depreciation, what is the book value as of December 31, 2013?
A) $146,000
B) $154,333
C) $159,000
D) $161,000
Q2) Land improvements are not subject to depreciation.
A)True
B)False
Q3) When computing depreciation:
A) the depreciable cost is the cost of the asset minus its accumulated depreciation. B) all assets must have a residual value.
C) the depreciable cost is the cost of the asset less accumulated depreciation. D) the estimated residual value is not depreciated.
Q4) Determine the cost of the dump truck, based upon the following data:
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Page 9
Chapter 8: Long-Term Investments the Time Value of Money
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Sample Questions
Q1) Kelsey Company owns 30% interest in the stock of David Corporation. During the year, David pays $25,000 in dividends, and reports $100,000 in net income. Kelsey Company's investment in David will increase by:
A) $25,000.
B) $30,000.
C) $24,000.
D) $22,500.
Q2) When rates of return are high in a stable economy, international investors buy stocks and bonds of that country. This activity increases the country's exchange rate.
A)True
B)False
Q3) Carmel Corporation purchased 5% bonds for $42,000 on January 1, 2012. On July 1, 2012, Carmel received cash interest of $1,050. The journal entry to record the receipt of interest on July 1 would include a:
A) debit to Cash $1,050.
B) debit to Long-Term Investment in Bonds $42,000.
C) credit to Interest Receivable $1,050.
D) credit to Interest Receivable $42,000.
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Chapter 9: Liabilities
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Sample Questions
Q1) Which is the preferred method to use when amortizing a bond discount or premium?
A) Market-interest rate method of amortization
B) Straight-line method of amortization
C) Effective-interest method of amortization
D) Both straight-line and market-interest rate methods of amortization are equally preferred.
Q2) A $5,000, 7% bond is quoted at 95. When the bond is issued, the Bonds Payable account will be increased by:
A) $4,750.
B) $4,650.
C) $5,000.
D) $5,100.
Q3) On December 1, Goliath Corporation borrowed $10,000 on a 90-day, 6% note. Goliath Corporation's year end is December 31. Determine the balance in any current liabilities associated with the note as of December 31.
Q4) Contingent liabilities are reported on the balance sheet.
A)True
B)False
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) Preferred stockholders:
A) receive dividends after common stockholders.
B) receive corporate assets upon liquidation after the common stockholders.
C) do not have any stockholder rights.
D) receive a fixed dividend when the board of directors declares the dividend.
Q2) In most cases, stockholders are more concerned about the par value of a stock than any other value.
A)True
B)False
Q3) The difference between the issue price of the stock and the par value of the stock is:
A) market value.
B) par value.
C) additional paid-in capital.
D) preferred stock.
Q4) Dividends in arrears on cumulative preferred stock are considered to be a liability. A)True
B)False
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Statement of Stockholders
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Sample Questions
Q1) Roughly half of all financial statement frauds over the past two decades have involved:
A) improper expense recognition.
B) improper revenue recognition.
C) improper depreciation methods.
D) bankruptcy.
Q2) Revenue fraud includes all of the following EXCEPT:
A) reporting revenue when goods have not yet been delivered.
B) channel stuffing.
C) sales to nonexistent customers.
D) recognizing revenue when earned.
Q3) Wildcat Corporation reported net income for the current year of $700,000. Wildcat had 5,000 shares of $100 par value, 10% preferred stock outstanding and 40,000 shares of $1 par value common stock outstanding for the entire year. Earnings per share was:
A) $17.50
B) $18.75
C) $16.25
D) $16.67
Page 13
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Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) Under the direct method of preparing the statement of cash flows, which statement is correct regarding the method of computing interest revenue?
A) Sales plus a decrease in interest receivable
B) Interest revenue plus a decrease in interest receivable
C) Interest revenue plus an increase in interest receivable
D) Interest revenue less a decrease in interest receivable
Q2) Plymouth Corporation reported an increase in inventory of $75,000. The cost of goods sold for the year was $180,000. There was also a $7,000 decrease in accounts payable from the beginning of the year to the end of the year. What were Plymouth's cash payments to suppliers?
A) $262,000
B) $248,000
C) $255,000
D) $187,000
Q3) The statement of cash flows:
A) can be prepared instead of an income statement.
B) must be prepared daily.
C) summarizes the operating, financing, and investing activities of an entity.
D) is part of the income statement.
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Page 14
Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) A financial statement that shows each item as a percentage of one key item on the statement is referred to as:
A) benchmarking.
B) common-size statement.
C) horizontal analysis.
D) statement of cash flows.
Q2) If economic value added (EVA) is negative:
A) stockholders' wealth has decreased.
B) stockholders' wealth has increased.
C) stockholders' wealth has stayed the same.
D) stockholders' earnings per share have increased.
Q3) Expressing cash and cash equivalents as a percentage of total assets is an example of:
A) horizontal analysis.
B) economic value added.
C) ratio analysis.
D) vertical analysis.
Q4) Horizontal analysis and trend analysis are synonymous.
A)True
B)False
Page 15
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