Accounting II Exam
Bank
Course Introduction
Accounting II builds upon the foundational principles learned in introductory accounting, deepening students understanding of financial accounting concepts and expanding into managerial accounting applications. This course covers topics such as partnerships, corporate accounting, stockholder equity, long-term liabilities, cash flow statements, and financial statement analysis. Special emphasis is placed on cost accounting methods, budgeting techniques, and the use of accounting information for managerial decision-making. Through real-world examples and practical exercises, students develop the skills necessary to analyze financial data, interpret accounting information, and support organizational planning and control functions.
Recommended Textbook
Horngrens Financial and Managerial Accounting 6th Edition by Tracie L. Nobles
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Chapter 1: Accounting and the Business Environment
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Sample Questions
Q1) Adventures Unlimited Company distributes cash dividends.How does this transaction affect the accounting equation?
A)The assets,liabilities,and equity remain the same.
B)The assets decrease and equity decreases.
C)The assets increase and liabilities decrease.
D)The assets decrease and equity increases.
Answer: B
Q2) A business purchases a building for $250,000.The current market value is $375,000.The tax assessment value is $325,000.At what value should the building be recorded,and which accounting principle supports your answer?
Answer: The building should be recorded at the actual cost of $250,000.This is supported by the cost principle.
Q3) An accounting firm collected cash on account.As a result of this transaction,assets and revenues increase.
A)True
B)False
Answer: False
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Chapter 2: Recording Business Transactions
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Q1) Which of the following is the final step in the journalizing and posting process?
A)Posting the accounts to the ledger
B)Identifying each account affected and its type
C)Determining whether the accounting equation is in balance
D)Determining whether each account has increased or decreased
Answer: C
Q2) When a business makes a cash payment,the Cash account is debited.
A)True
B)False
Answer: False
Q3) The account title used for recording the payment of rent in advance for an office building is ________.
A)Prepaid Rent
B)Rent Payable
C)Rent Revenue
D)Rent Expense
Answer: A
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Chapter 3: The Adjusting Process
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Q1) Contra asset accounts,such as Accumulated Depreciation,always have normal debit balances.
A)True
B)False
Answer: False
Q2) Which of the following accounts would be used under the accrual basis of accounting,but not under cash basis accounting?
A)Cash
B)Unearned Revenue
C)Service Revenue
D)Salaries Expense
Answer: B
Q3) Prepaid Insurance is an asset account that appears on the balance sheet.
A)True
B)False
Answer: True
Q4) Financial statements can be prepared from the unadjusted trial balance.
A)True
B)False
Answer: False
Page 5
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Chapter 4: Completing the Accounting Cycle
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Q1) A current ratio that has increased from the prior period indicates an improvement in the company's ability to pay its current debts.
A)True
B)False
Q2) Reversing entries are ________.
A)the exact opposite of a prior adjusting entry
B)dated the last day of the new period
C)required according to GAAP
D)expensive to record and time consuming
Q3) Assets with no physical form are ________.
A)current assets
B)intangible assets
C)not listed on the balance sheet because they have no value
D)included in stockholders' equity
Q4) Which of the following accounts will be included in a post-closing trial balance?
A)Service Revenue
B)Rent Expense
C)Interest Expense
D)Unearned Revenue
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Chapter 5: Merchandising Operations
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Q1) Under the terms FOB destination,title to the merchandise will pass to the purchaser when the goods are received by the purchaser.
A)True
B)False
Q2) A wholesaler is a merchandiser who buys goods from a manufacturer and then sells the goods to retailers.
A)True
B)False
Q3) What does "2/10" mean,with respect to "credit terms of 2/10,n/30"?
A)A discount of 2 percent will be allowed if the invoice is paid within 10 days of the invoice date.
B)Interest of 2 percent will be charged if the invoice is paid after 10 days from the date on the invoice.
C)A discount of 10 percent will be allowed if the invoice is paid within two days of the invoice date.
D)Interest of 10 percent will be charged if invoice is paid after two days.
Q4) Describe how the cost of goods sold is calculated when using the periodic inventory system.
Q5) What does the gross profit percentage measure? How is it computed?
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Chapter 6: Merchandise Inventory
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Q1) The amounts obtained for cost of goods sold and ending merchandise inventory are not the same for FIFO perpetual and FIFO periodic.
A)True
B)False
Q2) Camping Gear,Inc.had 600 units of inventory on hand at the end of the year.These were recorded at a cost of $17 each using the last-in,first-out (LIFO)method.The current replacement cost is $15 per unit.The selling price charged by Camping Gear,Inc.for each finished product is $23.As a result of recording the adjusting entry as per the lower-of-cost-or-market rule,the gross profit will ________.
A)increase by $9,000
B)decrease by $9,000
C)increase by $1,200
D)decrease by $1,200
Q3) The consistency principle states that a business should use the same accounting methods and procedures from period to period.
A)True
B)False
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Chapter 7: Internal Control and Cash
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Sample Questions
Q1) In a large company,the person in charge of signing checks is the controller.
A)True
B)False
Q2) In reconciling a bank statement,the bank balance is $2,100,and the checkbook balance is $2,001.Which of the following is the most probable reason for the bank balance being larger than the book balance?
A)There are outstanding checks.
B)The bank has deducted certain amounts for bank service charges.
C)A deposit in transit was made at the end of the month.
D)The company erroneously recorded a check for an amount less than the actual amount.
Q3) As proof of the deposit transaction,a customer receives a canceled check from the bank.
A)True
B)False
Q4) At the end of each day,the accountant proves the cash by comparing the cash in the drawer against the point-of-sale terminal record of cash sales.
A)True
B)False
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Chapter 8: Receivables
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Q1) Which of the following accounts would NOT appear on the financial statements of a retailer that does not issue its own private label credit card?
A)Merchandise Inventory
B)Cash and Cash Equivalents
C)Merchandise Sales
D)Credit Card Receivable
Q2) A newly created design business,Teri's Art,is finishing its first year of operations.During the year,credit sales were $43,000 and collections of credit sales were $34,000.One account for $675 was written off.Teri's Art uses the aging-of-receivables method to account for bad debts expense.It has estimated $200 as uncollectible at year-end.What is the amount of the Bad Debts Expense for the first year of operations?
A)$8,125
B)$675
C)$200
D)$875
Q3) Some companies promote and issue their own private label credit cards.
A)True
B)False
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Chapter 9: Plant Assets, natural Resources, and Intangibles
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Q1) Which of the following should be included in the cost of land?
A)cost to build sidewalks on the land
B)cost to clear the land of old buildings
C)cost of installing signage
D)cost of installing fences
Q2) Which of the following is an asset that represents distinctive identifications of a product or service?
A)license
B)copyright
C)franchise
D)trademark
Q3) An intangible asset is an asset with no physical form that is valuable because of the special rights it carries.
A)True
B)False
Q4) The units-of-production method is used to compute depletion expense.
A)True
B)False
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Chapter 10: Investments
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Q1) Consolidation accounting is the way to combine the financial statements of two or more companies that have the same owners.
A)True
B)False
Q2) When a company invests in equity securities with 20% to 50% ownership in the investee's _______ stock,the investor can ________ ________ the investee's decisions.These types of investments must be accounted for using the ________ method.
Q3) Available-for-sale (AFS)debt investments are reported as ________ if the business expects to sell them within one year.
A)current assets
B)equity
C)long-term assets
D)either current assets or long-term assets
Q4) Investments in debt securities are recorded at cost.Brokerage fees paid are treated as expenses.
A)True
B)False
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Chapter 11: Current Liabilities and Payroll
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Q1) The old age,survivors,and disability insurance component of FICA tax is imposed on the entire amount of an individual employee's earnings.
A)True
B)False
Q2) If a contingency that is probable can be reasonably estimated,a liability is recorded and an expense is accrued.
A)True
B)False
Q3) To compute the interest for notes payable,multiply principal times the annual rate of interest.
A)True
B)False
Q4) The times-interest-earned ratio is also called the short interest ratio.
A)True
B)False
Q5) The income tax column in a payroll register includes the corporate tax owed by the corporation.
A)True
B)False
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Chapter 12: Long-Term Liabilities
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Sample Questions
Q1) Callable bonds are bonds that the issuer may call and pay off at a specified price whenever the issuer wants.
A)True
B)False
Q2) Scotland,Inc.issued a $5,000 face value,10%,five-year bond at 98.What will be the journal entries at the maturity of the bond? The bonds have semiannual interest,and the company uses the straight-line method of amortization.Omit explanations.
Q3) On March 1,2018,Vintage Services issued an 8% long-term notes payable for $22,000.It is payable over a 16-year term in $1,375 principal installments on March 1 of each year,beginning March 1,2019.Each yearly installment will include both principal repayment of $1,375 and interest payment for the preceding one-year period.The journal entry to pay the first installment will include a debit to Interest Expense for $1,760.
A)True
B)False
Q4) Debt is a less expensive source of capital than stock.
A)True
B)False
Q5) What does the debt to equity ratio show,and how is it calculated?
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Chapter 13: Stockholders Equity
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Q1) Treasury stock ________.
A)decreases the number of shares issued
B)increases the number of shares issued
C)increases the number of shares outstanding
D)decreases the number of shares outstanding
Q2) A corporation originally issued $13 par value common stock for $15 per share.Which of the following is included in the entry to record the purchase of 300 shares of treasury stock for $11 per share?
A)Treasury Stock-Common is debited for $3300.
B)Treasury Stock-Common is credited for $45.
C)Retained Earnings is debited for $1650.
D)Treasury Stock-Common is debited for $1650.
Q3) The two basic sources of stockholders' equity are ________.
A)common stock and bonds
B)common stock and preferred stock
C)paid-in capital and retained earnings
D)no-par and stated value stock
Q4) Income tax expense is added to arrive at income from continuing operations.
A)True
B)False
Page 15
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Chapter 14: The Statement of Cash Flows
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Q1) Which of the following describes the financing activities section of the statement of cash flows?
A)It includes increases and decreases in long-term assets.
B)It includes cash inflows and outflows related to long-term liabilities and equity.
C)It includes interest and dividend income and cash payments for interest expense.
D)It reports on activities that create revenue or expenses for the entity's business.
Q2) Which of the following sections from the statement of cash flows includes the cash paid for the purchase of Treasury Stock?
A)the financing activities section
B)the operating activities section
C)the investing activities section
D)the non-cash investing and financing section
Q3) When preparing the statement of cash flows using the indirect method,depreciation expense is subtracted from net income under operating activities.
A)True
B)False
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Chapter 15: Financial Statement Analysis
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Q1) The auditor's report ________.
A)attests that the financial statements are error-free
B)is prepared by the internal auditors
C)states whether the financial statements are presented in accordance with GAAP
D)does not include an assessment of the effectiveness of the company's internal controls
Q2) In regards to benchmarking,which of the following statements is incorrect?
A)Benchmarking is the practice of comparing a company with other leading companies.
B)The industry average is not a useful benchmark for evaluating a company.
C)Providing common-size percentages in a graphical manner highlights differences.
D)The two main types of benchmarks in financial statement analysis include benchmarking against the industry average and benchmarking against a key competitor.
Q3) In an audit report in the annual report,a qualified opinion states that the financial statements are presented fairly in all material respects.
A)True
B)False
Q4) What is an annual report? Briefly describe the key parts of the annual report.
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Chapter 16: Introduction to Managerial Accounting
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Sample
Questions
Q1) ________ is a philosophy of continuous improvement of products and processes.
A)Just-in-Time (JIT)Management
B)Enterprise Resource Planning (ERP)
C)Supply Chain Management (SCM)
D)Total Quality Management (TQM)
Q2) An accounting field that helps managers plan and control operations.
A)Controlling
B)Managerial accounting
C)Organizational chart
D)Planning
E)Line position
F)Financial accounting
G)Directing
Q3) Depreciation on manufacturing equipment
A)Period cost
B)Product cost
Q4) Manufacturing costs flow from Work-in-Process Inventory to Cost of Goods Sold to Finished Goods Inventory.
A)True
B)False
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Chapter 17: Job Order Costing
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Q1) The journal entry to record allocation of manufacturing overhead to a particular job includes a ________.
A)debit to the Finished Goods Inventory account and credit to the Manufacturing Overhead account
B)debit to the Work-in-Process Inventory account and credit to the Cash account
C)debit to the Manufacturing Overhead account and credit to the Finished Goods Inventory account
D)debit to the Work-in-Process Inventory account and credit to the Manufacturing Overhead account
Q2) Which of the following best describes a job cost record?
A)a form used to track the transfer of raw materials to the production floor
B)a record that shows the raw materials balance as well as raw materials received and issued
C)a document that shows direct materials,direct labor and manufacturing overhead costs for an individual job
D)a record of employee productivity and downtime for a particular job
Q3) What is cost of goods manufactured? Describe the flow of this cost through the job order costing system.Your answer should include the accounts involved and whether the flow involves a debit or credit.
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Chapter 18: Process Costing
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Q1) Under process costing,direct materials and direct labor are assigned to Work-in-Process Inventory for each process that uses them.
A)True
B)False
Q2) Which of the following is an example of how managers use production cost reports to control costs?
A)setting product prices high enough for the company to be profitable
B)providing cost of goods sold for the income statement
C)determining if newer,more efficient equipment should be acquired
D)promoting products that are most profitable
Q3) When calculating the cost per equivalent unit in process costing,what is the difference between the weighted-average and FIFO methods?
A)With FIFO,prior period costs are not combined with current period costs.
B)With FIFO,prior period costs are combined with current period costs.
C)With weighted-average,prior period costs are not combined with current period costs.
D)There is no difference between the two methods.
Q4) When compared to job order costing,why are additional journal entries required in a process costing system?
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Chapter
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Q1) Internal failure costs are costs incurred ________.
A)to detect poor-quality materials,goods,or services
B)when the company corrects poor-quality goods or services before delivery to customers
C)after the company delivers poor-quality goods or services to customers and then has to make things right with the customer
D)to avoid poor-quality goods or services
Q2) Companies with diverse products can obtain better costing information by using a single plantwide rate for allocating manufacturing costs.
A)True
B)False
Q3) Marino,Inc.completed the production of 500 units with standard costs of $520 for direct materials and $75 for conversion costs.During the current year,it incurred $260,000 for direct materials and $31,000 for conversion costs.The company uses a just-in-time costing system.Record the adjusting entry for the amount of underallocated or overallocated conversion costs.Omit explanation.
Q4) List and briefly describe the four types of quality-related costs.
Q5) Define target cost.How is target cost determined?
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Chapter 20: Cost-Volume-Profit Analysis
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Q1) Which of the following statements is true if total fixed costs decrease while the sales price per unit and variable cost per unit remain constant?
A)The contribution margin increases.
B)The breakeven point increases.
C)The contribution margin decreases.
D)The breakeven point decreases.
Q2) How is the contribution margin ratio calculated?
Q3) Ambrosia Foods produces a gourmet condiment that sells for $24 per unit.Variable cost is $6 per unit,and fixed costs are $8000 per month.If Ambrosia expects to sell 1500 units,compute the margin of safety in units.(Round any intermediate calculations and your final answer to the nearest whole unit. )
A)444 units
B)1056 units
C)1500 units
D)19 units
Q4) Increases in sales price per unit ________ contribution margin per unit and ________ the breakeven point.
Q5) How is the unit contribution margin calculated?
Q6) How is the contribution margin calculated?
Page 22
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Chapter 21: Variable Costing
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Q1) Absorption costing considers ________ as product costs.
A)variable manufacturing overhead
B)sales salaries and commissions
C)administrative office salaries
D)advertising costs
Q2) Unit product cost calculations using absorption costing do NOT include ________.
A)fixed manufacturing overhead
B)variable manufacturing overhead
C)variable selling and administrative costs
D)direct materials
Q3) Some costs are not controllable in the long run.However,in the short run,all costs are controllable.
A)True
B)False
Q4) Absorption costing considers direct materials,direct labor,variable manufacturing overhead,and fixed manufacturing overhead as product costs.
A)True
B)False
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Chapter 22: Master Budgets
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Q1) Kuzma Foods,Inc.has budgeted sales for June and July at $690,000 and $720,000,respectively.Sales are 90% credit,of which 70% is collected in the month of sale and 30% is collected in the following month.What is the budgeted Accounts Receivable balance on July 31?
A)$216,000
B)$194,400
C)$186,300
D)$648,000
Q2) Which of the following statements regarding capital expenditures is incorrect?
A)Capital expenditures are purchases of long-term assets.
B)The decision to purchase long-term assets is part of a strategic plan.
C)Capital expenditures include delivery trucks,computer systems,and manufacturing equipment.
D)Installment payments related to the purchase of short-term assets are included in the capital expenditures budget.
Q3) The Finished Goods Inventory account must be considered when calculating the amount of direct materials to be purchased.
A)True
B)False
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Chapter 23: Flexible Budgets and Standard Cost Systems
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Q1) The variable overhead efficiency variance measures how well the business
A)keeps costs of variable overhead inputs within standard.
B)uses its variable overhead inputs.
C)keeps fixed overhead within standard.
D)explains why fixed overhead is under allocated or overallocated
Q2) Fixed overhead volume variance is a flexible budget variance. A)True
B)False
Q3) A company is setting its direct materials and direct labor standards for its leading product.Direct material costs from the supplier are $9 per square foot,net of purchase discount.Freight-in amounts to $0.20 per square foot.Basic wages of the assembly line personnel are $14 per hour.Payroll taxes are approximately 22% of wages.How much is the direct labor cost standard per hour? (Round your answer to the nearest cent. )
A)$3.08
B)$14.00
C)$17.08
D)$26.08
Q4) List three ways in which using a standard cost system helps managers.
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Chapter 24: Responsibility Accounting and Performance Evaluation
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Q1) Which of the following is NOT an advantage of decentralization?
A)provides training
B)frees top management time
C)works to achieve goal congruence
D)supports the use of expert knowledge
Q2) Centralized companies split their operations into segments and top management delegates decision making to the segment managers.
A)True
B)False
Q3) A(n)________ is a part of the organization for which a manager has decision-making authority and accountability for the results of those decisions.
A)responsibility center
B)cost center
C)investment center
D)revenue center
E)profit center
Q4) Net income is used in the numerator of the return on investment formula.
A)True
B)False
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Chapter 25: Short-Term Business Decisions
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Q1) Sutton Products is a price-setter that uses the cost-plus pricing approach.The products are specialty vacuum tubes used in sound equipment.The CEO is certain that the company can produce and sell 310,000 units per year,due to the high demand for the product.Variable costs are $2.30 per unit.Total fixed costs are $960,000 per year.The CEO will receive stock options if $400,000 of operating income for the year is reported.What sales price would allow the CEO to achieve the target if the cost-plus pricing method is used? (Round your answer to the nearest cent. )
A)$2.30 per unit
B)$6.69 per unit
C)$4.39 per unit
D)$4.11 per unit
Q2) When analyzing short-term business decisions,what are two important factors?
A)focus on costs that do not change under two alternatives and on historic costs
B)focus on qualitative data only and ignore future cash flows
C)focus on sunk costs and quantitative data
D)focus on relevant costs and use the contribution margin approach
Q3) Managers must consider both financial (quantitative)and nonfinancial (qualitative)factors when making decisions.Identify some possible relevant nonfinancial factors that managers might consider.
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Chapter 26: Capital Investment Decisions
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Q1) When computing the present value,the interest rate will vary depending on the amount of risk.Safer investments,such as FDIC-insured bank deposits,yield lower interest rates.
A)True
B)False
Q2) The only difference between the present value and future value of a lump sum is the amount of interest that is earned in the intervening time span.
A)True
B)False
Q3) An operational asset used for a long period of time is known as a capital asset.
A)True
B)False
Q4) Two methods of analyzing potential capital investments-payback and accounting rate of return-ignore the time value of money.
A)True
B)False
Q5) An annuity is a series of unequal payments over equal intervals. A)True
B)False
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Chapter 27: Accounting Information Systems
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Questions
Q1) For each of the following transactions,state which special journal should be used to record the transaction.In addition,state which columns will be used.
Transaction 1: Freeworld Co.paid $1,500 for monthly utilities,on the date the bill was received.
Which special journal?
Which columns are used to record the transaction?
Transaction 2: Wideworld Co.purchased office supplies on account.
Which special journal?
Which columns are used to record the transaction?
Transaction 3: Wonderworld Co.sold $5,000 of merchandise inventory to A.Allen,on account.The cost of the merchandise inventory was $3,200.The company uses a perpetual inventory system.
Which special journal?
Which columns are used to record the transaction?
Transaction 4: Oneworld Co.borrowed $10,000 from World National Bank.
Which special journal?
Which columns are used to record the transaction?
Q2) List and briefly discuss the three basic components of an accounting information system.
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