Accounting II
Chapter Exam Questions
Course Introduction
Accounting II builds upon the fundamental principles introduced in introductory accounting, delving deeper into topics such as partnerships, corporations, long-term liabilities, investments, and cash flow statements. The course emphasizes the preparation, analysis, and interpretation of financial statements, applying accounting standards to more complex business transactions. Topics may also include managerial accounting concepts, such as budgeting and performance evaluation, to support decision-making within organizations. Practical exercises and real-world examples help students develop critical skills necessary for advanced accounting roles and further study in the field.
Recommended Textbook
Financial Managerial Accounting 14th Edition by Carl Warren
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Page 2
Chapter 1: Introduction to Accounting and Business
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Q1) Financial accounting provides information to all users,while the main focus for managerial accounting is to provide information to the management.
A)True
B)False
Answer: True
Q2) A corporation is a business that is legally separate and distinct from its owners.
A)True
B)False
Answer: True
Q3) Which of the following asset accounts is increased when a receivable is collected?
A) Accounts Receivable
B) Supplies
C) Accounts Payable
D) Cash Answer: D
Q4) Prepare a balance sheet for the current year ended March 31.
Answer: 11ea8952_b5d8_f6da_861b_5b75de2a6d66_TB6238_00
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Chapter 2: Analyzing Transactions
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Sample Questions
Q1) The T account got its name because it resembles the letter "T."
A)True
B)False
Answer: True
Q2) Expenses follow the same debit and credit rules as
A) revenues
B) assets
C) the Common Stock account
D) liabilities
Answer: B
Q3) Which of the following groups of accounts have a normal debit balance?
A) revenues,liabilities,and stockholders' equity
B) stockholders' equity and assets
C) liabilities and stockholders' equity
D) assets and expenses
Answer: D
Q4) Liabilities are debts owed by the business entity.
A)True
B)False
Answer: True
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) The entry to adjust the accounts for salaries accrued at the end of the accounting period is
A) debit Salaries Payable; credit Cash
B) debit Cash; credit Salaries Payable
C) debit Salaries Payable; credit Salaries Expense
D) debit Salaries Expense; credit Salaries Payable
Answer: D
Q2) The matching principle
A) addresses the relationship between the journal and the balance sheet
B) determines whether the normal balance of an account is a debit or credit
C) requires that the dollar amount of debits equal the dollar amount of credits on a trial balance
D) states that the revenues and related expenses should be reported in the same period Answer: D
Q3) The matching principle requires expenses be recorded in the same period that the related revenue is recorded.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Determine the total assets.
A) $25,130
B) $16,830
C) $22,930
D) $24,030
Q2) The Income Statement columns in the end-of-period spreadsheet show that debits are equal to $55,800 and credits are $77,520.What does this information mean to the accountant?
A) net income of $21,720
B) net loss of $21,720
C) the accounts are out of balance,indicating an error has been made
D) the accounts have not been updated
Q3) What is the first account that should be listed in the post closing trial balance?
A) Income Summary
B) Common Stock
C) Cash
D) Fees Earned
Q4) Describe a classified balance sheet.
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Chapter 5: Accounting for Merchandising Businesses
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Q1) Using a perpetual inventory system,the entry to record the return of merchandise purchased on account includes a
A) debit to Cost of Goods Sold
B) credit to Accounts Payable
C) credit to Inventory
D) credit to Sales
Q2) Under the periodic inventory system,the cost of goods sold is equal to the beginning inventory plus the cost of merchandise purchased plus the ending inventory.
A)True
B)False
Q3) A company using the periodic inventory system has the following account balances: Inventory at the beginning of the year,$3,600; Freight In,$650; Purchases,$10,700; Purchases Returns and Allowances,$1,950; Purchases Discounts,$330.The cost of merchandise purchased is equal to
A) $12,670
B) $9,070
C) $8,420
D) $17,230
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Chapter 6: Inventories
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Sample Questions
Q1) Excess inventory results in all of the following except A) tied-up funds that could be used to improve operations
B) lost sales
C) increased storage expense
D) increased risk of loss due to damage
Q2) The value of ending inventory using LIFO is
A) $1,250
B) $1,350
C) $1,375
D) $1,150
Q3) What is the amount of cost of goods sold for the year according to the LIFO method?
A) $1,380
B) $1,375
C) $1,510
D) $1,250
Q4) Safeguarding inventory and proper reporting of the inventory in the financial statements are the reasons for controlling the inventory.
A)True
B)False
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Chapter 7: Internal Control and Cash
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Q1) In preparing a bank reconciliation,the amount of a canceled check omitted from the journal is added to the balance per company's records.
A)True
B)False
Q2) A voucher is a written authorization to make a cash payment.
A)True
B)False
Q3) When a firm uses internal auditors,it is adhering to which of the following internal control elements?
A) risk assessment
B) monitoring
C) proofs and security measures
D) information and communication
Q4) If an adjustment for an NSF check is made in a company's bank reconciliation,then the company must have written a bad check during the month.
A)True
B)False
Q5) Create an outstanding checks list for Madison at the end of May.
2.What is the total amount of checks that cleared the bank (written in May)?
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Chapter 8: Receivables
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Q1) When accounting for uncollectible receivables and using the percentage of sales method,the matching principle is violated.
A)True
B)False
Q2) If a promissory note is dishonored,the payee should still record interest revenue.
A)True
B)False
Q3) At the end of a period (before adjustment),Allowance for Doubtful Accounts has a credit balance of $250.The credit sales for the period total $500,000.If the company estimates uncollectible accounts at 1% of credit sales,the amount of bad debt expense to be recorded in an adjusting entry is $4,750.
A)True
B)False
Q4) If the maker of a note fails to pay the debt on the due date,the note is said to be dishonored.
A)True
B)False
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Chapter 9: Long-Term Assets: Fixed and Intangible
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Q1) Which of the following is true?
A) If using the double-declining-balance method,the total amount of depreciation expense during the life of the asset will be the highest.
B) If using the units-of-output method,it is possible to depreciate more than the depreciable cost.
C) If using the straight-line method,the amount of depreciation expense during the first year is higher than that of the double-declining-balance.
D) Regardless of the depreciation method,the amount of total depreciation expense during the life of the asset will be the same.
Q2) On October 1,Sebastian Company acquired new equipment with a fair market value of $458,000.Sebastian received a trade-in allowance of $92,000 on the old equipment of a similar type and paid cash of $366,000.The following information about the old equipment is obtained from the account in the equipment ledger: Cost,$336,000; accumulated depreciation on December 31,the end of the preceding fiscal year,$220,000; annual depreciation,$20,000.Assuming the exchange has commercial substance,journalize the entries to record: (a)the current depreciation of the old equipment to the date of trade-in and (b)the exchange transaction on October 1.
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Chapter 10: Liabilities: Current,installment Notes,and Contingencies
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Sample Questions
Q1) Quick assets include
A) cash,cash equivalents,receivables,prepaid expenses,and inventory
B) cash,cash equivalents,receivables,and prepaid expenses
C) cash,cash equivalents,receivables,and inventory
D) cash,cash equivalents,and receivables
Q2) Dixon Sales has seven sales employees that receive weekly paychecks.Each earns $10.25 per hour and each has worked 40 hours in the pay period.Each employee pays 12% of gross in federal income tax,3% of gross in state income tax,6% of gross in social security tax,1.5% of gross in Medicare tax,and 0.5% of gross in state disability insurance.Journalize the recognition of the pay period ending January 19 which will be paid to the employees January 26.
Q3) The journal entry a company uses to record pension rights that have not been funded for its salaried employees at the end of the year is
A) debit Salary Expense; credit Cash
B) debit Pension Expense; credit Unfunded Pension Liability
C) debit Pension Expense; credit Unfunded Pension Liability and Cash
D) debit Pension Expense; credit Cash
Q4) List five internal controls that relate directly to payroll.
Page 12
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Chapter 11: Liabilities: Bonds Payable
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Q1) If the straight-line method of amortization is used,the amount of unamortized premium on bonds payable will decrease as the bonds approach maturity.
A)True
B)False
Q2) The present value of the periodic bond interest payments is the value today of the amount of interest to be received at the end of each interest period.
A)True
B)False
Q3) To determine the six-month interest payment amount on a bond,you would take one-half of the market rate times the face value of the bond.
A)True B)False
Q4) When a portion of a bond issue is redeemed,a related proportion of the unamortized premium or discount must be written off.
A)True B)False
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Chapter 12: Corporations: Organization, stock Transactions, and Dividends
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Q1) The primary purpose of a stock split is to reduce the number of shares outstanding in order to encourage more investors to enter the market for the company's shares.
A)True
B)False
Q2) Cash dividends are normally paid on shares of treasury stock.
A)True
B)False
Q3) When a corporation completes a 3-for-1 stock split
A) the ownership interest of current stockholders is decreased
B) the market price per share of the stock is decreased
C) the par value per share is decreased
D) the market price per share of the stock and the par value per share is decreased
Q4) A prior period adjustment should be reported as an adjustment to the retained earnings balance at the beginning of the period in which the adjustment was made.
A)True
B)False
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Chapter 13: Statement of Cash Flows
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Q1) Changes in current assets and current liabilities are reported on the statement of cash flows,indirect method,in the
A) operating activities
B) financing activities
C) investing activities
D) separate schedule of noncash activities
Q2) The main disadvantage of the direct method of reporting cash flows from operating activities is that the necessary data are often costly to accumulate.
A)True
B)False
Q3) When using the spreadsheet (work sheet)method to analyzing noncash accounts,no order of analysis is required,but it is more efficient to start with Retained Earnings and proceed upward in the account listing.
A)True
B)False
Q4) The statement of cash flows is an optional financial statement.
A)True
B)False
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Chapter 14: Financial Statement Analysis
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Q1) The denominator of the return on total assets ratio is the average total assets.
A)True
B)False
Q2) Factors that reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to as solvency,profitability,and liquidity.
A)True
B)False
Q3) The relationship of $325,000 to $125,000,expressed as a ratio,is
A) 2.0
B) 2.6
C) 2.5
D) 0.45
Q4) An unusual item is often related to current operations and occurs infrequently.
A)True
B)False
Q5) An increase in the accounts receivable turnover may be due to a change in how credit is granted and / or in collection practices.
A)True
B)False
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Chapter 15: Introduction to Managerial Accounting
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Q1) Sustainability is the practice of operating a business to maximize profits while attempting to preserve the environment,economy,and needs of future generations.
A)True
B)False
Q2) All of the following employees hold line positions in Facebook except
A) vice president of production
B) vice president of finance
C) manager of the web design
D) vice president of sales
Q3) Electricity costs to run the factory
A)Product
B)Period
Q4) Which of the following accounts will be found on the income statement?
A) Inventory
B) Work in Process
C) Finished Goods
D) Cost of Goods Sold
Q5) Differentiate between a line department and a staff department.
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Chapter 16: Job Order Costing
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Q1) The direct labor and overhead costs of providing services to clients are accumulated in a work in process account.
A)True
B)False
Q2) Recording jobs shipped and customers billed would include a credit to
A) Accounts Payable
B) Cash
C) Finished Goods
D) Cost of Goods Sold
Q3) On the balance sheet for a manufacturing business,the cost of direct materials,direct labor,and factory overhead,which have entered into the manufacturing process but are associated with products that have not been finished,are reported as direct materials inventory.
A)True
B)False
Q4) Which of the following represents the factory overhead applied to a product?
A) predetermined factory overhead rate times estimated activity base
B) actual factory overhead rate times estimated activity base
C) predetermined factory overhead rate times actual activity base
D) actual factory overhead rate times actual activity base
Page 18
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Chapter 17: Process Cost Systems
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Q1) In applying the first-in,first-out method of costing inventories,if 8,000 units which are 30% completed are in process at June 1,28,000 units are completed during June,and 4,000 units were 80% completed at June 30,the number of equivalent units of production for June was 28,600.
A)True
B)False
Q2) A process cost system be appropriate for a
A) natural gas refinery
B) jet airplane builder
C) catering business
D) custom cabinet builder
Q3) Using the FIFO method and rounding cost per unit to four decimal places,the cost of goods completed and transferred out during July was
A) $227,270
B) $225,060
C) $236,905
D) $228,200
Q4) Explain the concept of equivalent units.Give an example to validate your explanation.
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Chapter 18: Activity-Based Costing
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Q1) Managers depend on accurate factory overhead allocation to make decisions regarding product mix and product price.
A)True
B)False
Q2) What is the Fabrication Department overhead rate per machine hour?
A) $10.50
B) $9.00
C) $8.12
D) $3.75
Q3) Determine the overhead in the Finishing Department for each unit of Product A if Blue Ridge Marketing Inc.uses a multiple department rate system.
A) $99.20 per unit
B) $49.60 per unit
C) $64.00 per unit
D) $28.80 per unit
Q4) Product costing consists of only direct materials and direct labor.
A)True
B)False
Q5) Calculate the cost of services for a highlight.
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Chapter 19: Cost-Volume-Profit Analysis
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Q1) Cost behavior refers to the manner in which a cost changes as the related activity changes.
A)True
B)False
Q2) Garmo Co.has an operating leverage of 5.Next year's sales are expected to increase by 10%.The company's operating income will increase by 50%.
A)True
B)False
Q3) Which of the graphs in Figure 21-1 illustrates the behavior of a total variable cost?
A) Graph 2
B) Graph 3
C) Graph 4
D) Graph 1
Q4) Penny Company sells 25,000 units at $59 per unit.Variable costs are $29 per unit,and loss from operations is $(50,000).Determine the (a)unit contribution margin (b)contribution margin ratio,and (c)fixed costs per unit at production of 25,000 units.
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Chapter 20: Variable Costing for Management Analysis
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Q1) In contribution margin analysis,the effect of a difference in unit sales price or unit cost on the number of units sold is termed the quantity factor.
A)True
B)False
Q2) If variable selling and administrative expenses totaled $120,000 for the year (80,000 units at $1.50 each)and the planned variable selling and administrative expenses totaled $136,500 (78,000 units at $1.75 each),the effect of the unit cost factor on the change in contribution margin is:
A) $19,500 decrease
B) $19,500 increase
C) $20,000 decrease
D) $20,000 increase
Q3) In the absorption costing income statement,deduction of the cost of goods sold from sales yields contribution margin.
A)True
B)False
Q4) Variable costing is also known as direct costing.
A)True
B)False
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Chapter 21: Budgeting
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Q1) At the beginning of the period,the Molding Department budgeted direct labor of $33,000 and supervisor salaries of $24,000 for 3,000 hours of production.The department actually completed 2,500 hours of production.Determine the budget for the department assuming that it uses flexible budgeting?
Q2) Sleep Tight,Inc.manufactures bedding sets.The budgeted production is for 52,000 comforters this year.Each comforter requires 1.5 hours to cut and sew the material.The cost of cutting and sewing labor is $12.50 per hour.Determine the direct labor budget for this year.
Q3) The flexible budget is,in effect,a series of static budgets for different levels of activity. A)True B)False
Q4) A formal written statement of management's plans for the future,expressed in financial terms,is called a budget. A)True B)False
Q5) The sales budget is derived from the production budget. A)True B)False
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Chapter 22: Evaluating Variances From Standard Costs
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Q1) Tthe variable factory overhead controllable variance is
A) $8,981.75 favorable
B) $7,280.75 unfavorable
C) $8,981.75 unfavorable
D) $7,280.75 favorable
Q2) It is correct to rely exclusively on past cost data when establishing standards.
A)True
B)False
Q3) If the standard to produce a given amount of product is 600 direct labor hours at $15 and the actual was 500 hours at $17,the time variance was $1,700 unfavorable.
A)True
B)False
Q4) What is the direct labor rate variance?
A) $14,000 favorable
B) $14,000 unfavorable
C) $15,400 favorable
D) $15,400 unfavorable
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24
Chapter 23: Evaluating Decentralized Operations
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Q1) What is the service department charge rate for Graphics Production?
A) $2.00
B) $10.00
C) $6.66
D) $0.50
Q2) A disadvantage to using the residual income performance measure is that it encourages managers to spend only the minimum acceptable rate of return on assets set by upper management.
A)True
B)False
Q3) The profit margin is the
A) ratio of income from operations to sales
B) ratio of income from operations to invested assets
C) ratio of assets to liabilities
D) ratio of sales to invested assets
Q4) If the profit margin for a division is 11% and the investment turnover is 1.5,the rate of return on investment is 7.3%.
A)True
B)False
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Chapter 24: Differential Analysis and Product Pricing
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Q1) Using the variable cost concept,determine the selling price for 30,000 units using the following data: variable cost per unit,$15.00; total fixed costs,$90,000; and desired profit,$150,000.
Q2) Using the variable cost concept,determine the selling price for 30,000 units using the following data:
Variable cost per unit $15.00
Total fixed costs $90,000
Desired profit $150,000
A) $10
B) $15
C) $8
D) $23
Q3) In order to meet the new target cost,how much will the company have to cut costs per unit,if any?
A) $1
B) $3
C) $2
D) $0
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Chapter 25: Capital Investment Analysis
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Q1) A qualitative characteristic that may impact upon capital investment analysis is market opportunities.
A)True
B)False
Q2) In net present value analysis for a proposed capital investment,the expected future net cash flows are reduced to their present values.
A)True
B)False
Q3) In capital rationing,an initial screening of alternative proposals is usually performed by establishing minimum standards.Which of the following evaluation methods are often used?
A) cash payback method and average rate of return method
B) average rate of return method and net present value method
C) net present value method and cash payback method
D) internal rate of return and net present value methods
Q4) The process by which management allocates available investment funds among competing capital investment proposals is termed capital rationing.
A)True
B)False
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Chapter 26: Lean Manufacturing and Activity Analysis
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Q1) Lead time includes both value-added time and non-value-added time.
A)True
B)False
Q2) Push manufacturing is also referred to as make-to-order processing.
A)True
B)False
Q3) The lean philosophy attempts to reduce setup times,which will:
A) increase batch sizes
B) not affect batch sizes
C) increase within-batch wait time
D) decrease within-batch wait time
Q4) A nonfinancial measure is operating information that has not been translated into dollars.
A)True
B)False
Q5) Financial accounting information is used more often for long-term operating decisions and nonfinancial information is used more often for day-to-day decisions.
A)True
B)False
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