Accounting II Exam Practice Tests
Course Introduction
Accounting II builds upon foundational accounting principles, focusing on more advanced topics such as the preparation and analysis of financial statements, accounting for receivables and payables, inventory valuation methods, and the treatment of fixed assets and intangible assets. The course emphasizes the application of accounting concepts to partnerships, corporations, and cash flow analysis. Students will further develop their ability to interpret financial data, make informed business decisions, and understand the regulatory environment governing financial reporting. This course serves as a critical stepping stone for those pursuing further studies or careers in accounting and finance.
Recommended Textbook
Financial and Managerial Accounting 9th Edition by Belverd E. Needles
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29 Chapters
4470 Verified Questions
4470 Flashcards
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Page 2
Chapter 1: Uses of Accounting Information and the Financial Statements
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Sample Questions
Q1) Which of the following is not a satisfactory statement of the accounting equation?
A) Assets = Liabilities + Stockholders' Equity
B) Assets - Stockholders' Equity = Liabilities
C) Assets = Liabilities - Stockholders' Equity
D) Assets - Liabilities = Stockholders' Equity
Answer: C
Q2) The terms bookkeeping and accounting are synonymous.
A)True
B)False
Answer: False
Q3) Distinguish between profitability and liquidity.
Answer: Profitability is the ability to earn enough income to attract and hold investment capital,whereas liquidity means having enough funds on hand to pay debts when they fall due.
Q4) Creditors are those who lend money to others or deliver goods and services before being paid.
A)True
B)False
Answer: True
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Chapter 2: Analyzing Business Transactions
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Sample Questions
Q1) The general journal does not have a column titled
A) Description.
B) Account Balance.
C) Date.
D) Post. Ref.
Answer: B
Q2) Office supplies are classified as an expense.
A)True
B)False Answer: False
Q3) When a company receives a product previously ordered,a recordable transaction has occurred.
A)True
B)False
Answer: True
Q4) The valuation issue deals with how the components of a transaction should be categorized.
A)True
B)False Answer: False
Page 4
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Chapter 3: Measuring Business Income
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Sample Questions
Q1) The adjustment for estimated income taxes would include a
A) credit to Income Taxes Payable.
B) debit to Unearned Income Taxes.
C) credit to Income Taxes Expense.
D) credit to Cash.
Answer: A
Q2) The adjustment entry for the expiration of prepaid advertising,originally recorded as an asset,is
A) Advertising Expense - Debit; Prepaid Advertising - Credit
B) Prepaid Advertising - Debit; Cash - Credit
C) Advertising Expense - Debit; Cash - Credit
D) Prepaid Advertising - Debit; Advertising Expense - Credit
Answer: A
Q3) The carrying value of equipment is the estimated dollar amount the equipment could be sold for.
A)True
B)False
Answer: False
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5
Chapter 3: Supplement - Closing Entries and the Work Sheet
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Sample Questions
Q1) Which of the following accounts most likely would have an amount contained in every set of columns but the Balance Sheet columns of a work sheet?
A) Dividends
B) Depreciation Expense
C) Unearned Revenue
D) Wages Expense
Q2) Which of the following accounts will have an amount in the Adjustments columns of the work sheet but probably not in the Trial Balance columns?
A) Common Stock
B) Utilities Expense
C) Depreciation Expense-Machinery
D) Revenue from Services
Q3) Despite the many uses of microcomputers,they cannot be used to prepare work sheets.
A)True
B)False
Q4) The amount of dividends for the period can be found on the work sheet. A)True
B)False
6
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Chapter 4: Financial Reporting and Analysis
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Sample Questions
Q1) Which of the following appears in different sections of the income statement when prepared on a single-step basis and when prepared on a multistep basis?
A) Sales commissions
B) Office salaries
C) Interest income
D) Sales
Q2) Profit margin and gross margin are the same thing.
A)True
B)False
Q3) Distinguish between cost of goods sold and operating expenses,describing the nature of these two items and their placement on the income statement.
Q4) Freight paid on goods shipped to customers is classified as a selling expense.
A)True
B)False
Q5) Natural resources,such as coal mines and oil wells,are classified as intangible assets.
A)True B)False
Q6) State the definition of a current asset.
Page 7
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Chapter 5: The Operating Cycle and Merchandising Operations
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Sample Questions
Q1) A retailer accepted Visa charge sales totaling $500 and deposited the charge slips in the bank.Assuming a credit card discount expense of 4 percent,what would be the increase to Cash and the increase to Sales,respectively?
A) $500 and $480
B) $480 and $500
C) $480 and $480
D) $500 and $500
Q2) Each of the following companies is a merchandising business except a A) candy store.
B) car wash.
C) wholesale parts company.
D) furniture store.
Q3) When the periodic inventory system is used,a physical inventory should be taken at the end of the fiscal year.
A)True
B)False
Q4) When the buyer bears the transportation charge,it is called freight-out.
A)True
B)False
8
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Chapter 6: Inventories
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Sample Questions
Q1) Use this inventory information for the month of March to answer the following questions. \(\begin{array}{llll}
\text { Mar. } & 1 & \text { Beginning inventory } & 20 \text { units @ } \$ 76 \\ & 7 & \text { Purchase } & 70 \text { units @ } \$ 80\\ &18 & \text { Sale } & 25 \text { units } \\ &22 & \text { Purchase } & 10 \text { units @ } \$ 88 \\ &29 & \text { Sale } & 40 \text { units } \end{array}\)
Assuming that a perpetual inventory system is used,what is ending inventory on a LIFO basis?
A) More information is needed.
B) $5,120
C) $2,720
D) $2,880
Q2) Under the perpetual inventory system,cost of goods sold is not recorded until the end of the accounting period.
A)True
B)False
Q3) Why are cost flow assumptions made when accounting for merchandise inventory?
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Page 9
Chapter 7: Cash and Receivables
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Sample Questions
Q1) It is considered unethical to use the estimate for bad debts to purposely manipulate the amount of net income.
A)True
B)False
Q2) A company that uses the allowance method writes off a specific account as uncollectible,but then the customer pays.The entries made upon receiving payment will A) decrease Cash.
B) decrease Accounts Receivable.
C) increase Allowance for Uncollectible Accounts.
D) decrease Uncollectible Accounts Expense.
Q3) At year end,Erwin Graphics has a $350 debit balance in Allowance for Uncollectible Accounts.It estimates that 5 percent of the $20,000 in sales are uncollectible.Give the amount that should be used in the adjusting entry using percentage of net sales method to record uncollectible accounts.(Show your calculations.)
Q4) If a promissory note is dishonored,the payee should record interest income.
A)True
B)False
Q5) Why do businesses need to keep some currency on hand?
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Page 10
Chapter 8: Current Liabilities and Fair Value Accounting
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Sample Questions
Q1) Use this information to answer the following question. \[\begin{array} { | c | c | c | }
\hline \text { Periods } & \text { Present Value af } \$ 1 \text { at } 7 \text { Percent } &
\text { Present Value af Ordinary Annuity of } \\
&&\text { \$1 at } 7 \text { Percent } \\
1 & 0.935 & 0.935 \\
\hline 2 & 0.873 & 1.808 \\
\hline 3 & 0.816 & 2.624 \\
\hline
\end{array}\] What amount must be deposited today so that $600 may be withdrawn at the end of each year for three years?
A) $1,800.00
B) $1,925.14
C) $1,574.40
D) $1,683.00
Q2) The most common examples of commitments are leases and purchase agreements.
A)True
B)False
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Chapter 9: Long Term Assets
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Sample Questions
Q1) A revenue expenditure results in the immediate recognition of an expense.
A)True
B)False
Q2) Underestimating the number of tons of a mineral that can be mined over a mineral deposit's life will result in
A) overstated total assets each year.
B) overstated net income each year.
C) overstated depletion expense each year.
D) no effect on total assets each year.
Q3) Depreciation should not be recorded for a depreciable asset that is increasing in value.
A)True
B)False
Q4) Which of the following is not classified properly as property,plant,and equipment?
A) Land improvements, such as parking lots and fences
B) Natural resources
C) Land used in ordinary business operations
D) A truck held for resale by an automobile dealership
Q5) Present two arguments in favor of the use of accelerated depreciation.
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Chapter 10: Long-Term Liabilities
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Sample Questions
Q1) A bond indenture is
A) a bond that is secured by specific assets of the issuing corporation.
B) the agreement between the issuing corporation and the bondholders.
C) a bond that is unsecured.
D) a bond that has past due interest payments.
Q2) The amount of cash received on issuance of a 9 percent,$10,000 bond dated February 1 and issued June 1 at 102 1/2 is
A) $10,300.
B) $11,100.
C) $10,200.
D) $10,550.
Q3) The amount of unamortized discount at the end of an interest period is equal to the amount of the unamortized discount at the beginning of the period minus the amount of discount that was amortized during the period.
A)True
B)False
Q4) When fixed mortgage payments are made,in what way does the interest portion change each month,and why?
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Page 13
Chapter 11: Contributed Capital
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Sample Questions
Q1) Why must a corporation have sufficient retained earnings before it may declare cash dividends?
Q2) Outstanding shares of stock are
A) authorized shares that have not yet been issued.
B) also called treasury shares.
C) shares of stock owned by unknown individuals.
D) issued shares that are still in circulation.
Q3) According to generally accepted accounting principles,treasury stock usually should be recorded at
A) original issue cost.
B) par or stated value.
C) cost.
D) net realizable value.
Q4) An advantage of the corporate form is the ability of the board to hire professional managers to attend to the corporation's affairs.
A)True
B)False
Q5) Why might someone prefer to invest in a company by purchasing preferred stock rather than common stock?
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Chapter 12: Investments
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Sample Questions
Q1) Eliminations are important because they avoid double counting when consolidated financial statements are prepared.
A)True
B)False
Q2) When a parent company pays less than book value for an investment in a subsidiary,the excess of book value over the cost of the investment should be used to lower the carrying value of the subsidiary's long-term assets (other than long-term marketable securities)in preparing the consolidated financial statements.
A)True
B)False
Q3) Minority interest is reported as a(n)
A) current liability on the consolidated balance sheet.
B) asset on the consolidated balance sheet.
C) revenue item on the consolidated income statement.
D) separate item between liabilities and stockholders' equity on the consolidated balance sheet.
Q4) Most long-term bond investments are classified as held-to-maturity securities.
A)True
B)False
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Chapter 13: The Corporate Income Statement and the Statement of Stockholders Equity
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Sample Questions
Q1) Income tax allocation procedures are justified by which of the following basic concepts?
A) Cash basis accounting
B) Revenue recognition
C) Conservatism
D) Matching
Q2) On which of the following dates involving stock dividends does a liability arise?
A) Date of distribution
B) Date of declaration
C) Date of record
D) On no date
Q3) The quality of earnings will be affected by which of the following?
A) Estimation of building's useful life
B) Choice of inventory method
C) Discontinued operations
D) All of these
Q4) Net income is a component of comprehensive income.
A)True
B)False
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Chapter 14: The Statement of Cash Flows
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Sample Questions
Q1) Royer Corporation engaged in this transaction: Issued stock for equipment.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.
A) Financing activities section
B) Operating activities section
C) Investing activities section
D) Schedule of noncash investing and financing transactions
Q2) Royer Corporation engaged in this transaction: Received dividends on securities held.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.
A) Schedule of noncash investing and financing transactions
B) Operating activities section
C) Financing activities section
D) Investing activities section
Q3) On the lines below,provide the components for the calculation of free cash flow.
Q4) Why does the acquisition of land in exchange for common stock qualify as a noncash investing and financing transaction?
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Chapter 15: The Changing Business Environment - a Managers Perspective
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Sample Questions
Q1) Which of the following statements is true regarding the ethical standards of management accountants?
A) Management accountants are not obligated to develop their knowledge and skills beyond the level they had when they sought employment with the company.
B) Management accountants are not responsible for monitoring their subordinates to ensure maintenance of confidentiality within the company.
C) Management accountants are allowed privacy and are not bound to refrain from supporting activities of personal interest even when they could discredit the profession.
D) Management accountants should refrain from relationships with individuals that could cause possible conflicts of interest.
Q2) If a management accountant gives information about a future merger of his or her company to a relative,the accountant has acted unethically.
A)True
B)False
Q3) Identify three uses of the costs of quality information.
Q4) What steps would a company using TQM take to improve product or service quality?
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Page 18
Chapter 16: Cost Concepts and Cost Allocation
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Sample Questions
Q1) Taperno Manufacturing Company has made the following cost estimates for next year:
\[\begin{array} { |l r| }
\hline \text { Direct labor } & \$ 90,000 \\
\text { Direct materials } & 72,000 \\
\text { Indirect labor } & 19,200 \\
\text { Indirect materials } & 8,400 \\
\text { Depreciation - factory building } & 8,200 \\
\text { Depreciation - factory machinery } & 4,200 \\
\text { Depreciation -office equigment } & 500 \\
\text { Factory utilities } & 4,900 \\
\text { Factory property taxes } & 3,100 \\
\text { Selling exgenses } & 25,000 \\
\text { Miscellanedus overhead costs } & 5,600 \\
\text { General and administrative expenses } & 19,000 \\
\hline
\end{array}\] The company applies overhead based on direct labor hours.The estimated direct labor hours for next year are 16,000 hours.
Compute the overhead application rate that will be used to apply overhead during the next year.
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Page 19
Chapter 17: Costing Systems- Job Order Costing
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Sample Questions
Q1) Which of the following accurately describes a difference between job order and process costing systems?
A) In job order costing systems, overhead costs are treated as product costs, whereas in process costing systems, overhead costs are treated as period costs.
B) Job order costing systems do not need to assign costs to production, whereas process costing systems do.
C) In job order costing systems, costs are traced to products, whereas in process costing systems, costs are traced to processes, departments and work cells.
D) Since costs are assigned to products in a job order costing system, selling costs are treated as product costs in the job order costing system, whereas they are treated as period costs in process costing systems.
Q2) To prepare financial statements at the end of the accounting period,the actual overhead cost for the period and the estimated overhead that was applied during the period must be reconciled in a job order costing system.
A)True
B)False
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Chapter 18: Costing Systems- Process Costing
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Sample Questions
Q1) Which of the following items most likely would be manufactured using a process costing system?
A) Income tax services
B) Soup
C) A hotel
D) Wedding invitations
Q2) Direct materials costs and conversion costs for the current period on a process cost report are divided by their respective units of equivalent production to arrive at the
A) ending inventory unit cost.
B) transferred-in cost per unit.
C) beginning inventory cost per unit.
D) cost per equivalent unit.
Q3) Which method assumes that all units in beginning work in process (WIP)are completed in the current period?
A) LIFO
B) Average cost
C) FIFO
D) Direct
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21
Chapter 19: Value-Based Systems- Abm and Lean
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Sample Questions
Q1) A value chain involves a sequence of value-creating activities within an organization.
A)True
B)False
Q2) Lean's primary goal is to eliminate waste in business processes.
A)True
B)False
Q3) President/CEO to her Controller:
"On the golf course yesterday I overheard John Jeffers,the CEO for Octal,say that the problem with many manufacturing companies today is their antiquated manufacturing cost accounting systems.It appears to me that our cost accounting system has served us well as our company has grown and should continue to serve us well as we move into JIT production with our new flexible manufacturing system." As the Controller,respond to the President/CEO.
Q4) Only value-adding activities are included in the cost hierarchy.
A)True
B)False
Q5) When using a just-in-time system,what qualities should be used to evaluate a supplier?
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Chapter 20: Cost Behavior Analysis
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Sample Questions
Q1) When using the high-low method,the accountant assumes the fixed portion of mixed costs to be the lowest fixed amount incurred during the period under review.
A)True
B)False
Q2) Theoretical capacity reduced by normal and anticipated work stoppages is called A) practical capacity.
B) normal capacity.
C) ideal capacity.
D) excess capacity.
Q3) For profit planning purposes,the following equation is used: Target Sales Units = (FC + P)÷ CM per Unit.
A)True
B)False
Q4) Explain what cost-volume-profit analysis is and how managers use it.Give examples of some purposes for which it might be used.
Q5) Straight-line depreciation on the controller's computer is an example of a variable cost.
A)True
B)False
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Chapter 21: The Budgeting Process
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Sample Questions
Q1) The Budget Committee oversees each stage in the preparation of a master budget.
A)True
B)False
Q2) A sales forecast is expressed in units and dollars.
A)True
B)False
Q3) The main difference in the master budget process for manufacturing,retail,and service organizations is found in the preparation of the operating budgets.
A)True
B)False
Q4) Static budgets are prepared on quarterly basis and require frequent change during the annual budget period.
A)True
B)False
Q5) Only manufacturing organizations need a set of operating budgets.
A)True
B)False
Q6) Describe three benefits budgeting provides to an organization's success.
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Chapter 22: Performance Management and Evaluation
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Sample Questions
Q1) A performance management and evaluation system is utilized so that a company can identify which of the following?
A) How well it is doing and where it is going
B) How satisfied investors are with their return on investment
C) How satisfied both customers and employees are
D) How well it is doing, where it is going, and what improvements will bring in more profit
Q2) In evaluating investment center performance,ROI proves to be such a comprehensive performance measure that other performance measures are rarely needed.
A)True
B)False
Q3) Most organizations use very similar performance measures in their day-to-day business operations.
A)True
B)False
Q4) Why are managers more likely to achieve their objectives in both the short term and the long term when they utilize a tool such as the balanced scorecard?
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25
Chapter 23: Standard Costing and Variance Analysis
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Sample Questions
Q1) Ewing Corporation's controller has developed the cost and usage data listed below in preparation of standard unit cost information for the coming year. \(\begin{array}{lr}
\text { Direct materials quantity standard } & 3 \text { pounds per product } \\
\text { Direct labor time standard } & 5 \text { hours per product } \\
\text { Direct materials price standard } & \$ 10 \text { per pound } \\
\text { Direct labor rate standard } & \$ 9 \text { per hour } \\
\text { Standard variable overhead rate } & \$ 5 \text { per labor hour } \\
\text { Standard fixed overhead rate } & \$ 10 \text { per labor hour } \end{array}\)
The standard unit cost for overhead is
A) $15.
B) $25.
C) $50.
D) $75.
Q2) The flexible budget formula is an equation that determines unexpected costs at any level of output.
A)True
B)False
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26
Chapter 24: Short Run Decision Analysis
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Sample Questions
Q1) Qualitative factors used by decision makers include all of the following except A) social issues.
B) revenue from fees.
C) timeliness.
D) competition.
Q2) "Variable costs are relevant and fixed costs are irrelevant." Explain why you agree or disagree with this statement.
Q3) The first step in the incremental analysis is to eliminate any irrelevant revenues and costs.
A)True
B)False
Q4) What two criteria must be met for information to be considered relevant to decision making?
Q5) Outsourcing is the use of suppliers outside the organization to perform services or produce goods that cannot be performed or produced internally.
A)True
B)False
Q6) Discuss the qualitative factors that should be considered in short-run decision making.
Page 27
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Chapter 25: Capital Investment Analysis
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Sample Questions
Q1) The payback period method of evaluating proposed capital investment does not take into account the time value of money.
A)True
B)False
Q2) To use an annuity table,the cash flows for each interest period must be equal.
A)True
B)False
Q3) Smile Industries capital structure consists of $1,000,000 of debt at 6 percent interest and 1,500,000 of stockholders equity at 2 percent.
The proportion of Debt in the total capital structure is
A) 10%
B) 15%
C) 40%
D) 100%
Q4) The company's minimum rate of return is also referred to as its cost of capital.
A)True
B)False
Q5) Why the residual value of equipment is relevant when considering the replacement of equipment?
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Chapter 26: Pricing Decisions,incltarget Costing and Transfer Pricing
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Sample Questions
Q1) An internal issue to be considered when setting a price is
A) whether the process is labor-intensive or automated.
B) the customer's preferences for quality versus price.
C) current prices of competing products or services.
D) the life of the product or service.
Q2) Development of a transfer price involves A) legal agreements.
B) increases in insurance premiums.
C) redistribution.
D) negotiation.
Q3) A negotiated transfer price
A) is one that is bargained for between the managers of the buying and selling divisions. B) would not be based on a product market price that has been reduced through bargaining by division managers.
C) could never be used in an agreement based on standard costs and a profit margin.
D) is usually developed by lawyers following defined legal procedures.
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29
Chapter 27: Quality Management and Measurement
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Sample Questions
Q1) XYZ Cosmetics,Inc.,has developed a set of nonfinancial measures to evaluate on-time product delivery performance for one of its best-selling cosmetics.The following data have been generated for the past four weeks: \[\begin{array} { l l l l } & \text { Purchase } & \text { Praduction } & \\ & \text { Order } & \text { Cycle } & \text { Delivery } \\ \text { Week } & \text { Lead Time } & \text { Time } & \text { Time } \\
1 & 2.4 \text { days } & 3.5 \text { days } & 4.0 \text { days } \\
2 & 2.3 \text { days } & 3.4 \text { days } & 3.6 \text { days } \\
3 & 2.4 \text { days } & 3.3 \text { days } & 3.4 \text { days } \\
4 & 2.2 \text { days } & 3.1 \text { days } & 3.7 \text { days } \end{array}\]
Compute total delivery cycle time for each week and evaluate the product delivery performance.Which area still needs management's attention?
A) Purchase order lead time
B) Production cycle time
C) Delivery time
D) None, all have improved over the past four weeks.
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Chapter 28: Financial Analysis of Performance
Available Study Resources on Quizplus for this Chatper
164 Verified Questions
164 Flashcards
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Sample Questions
Q1) The annual report of a publicly held corporation usually does not contain the auditors' report.
A)True
B)False
Q2) A change from FIFO to LIFO in a period of rising prices will
A) decrease both the current ratio and the inventory turnover ratio.
B) increase both the current ratio and the inventory turnover ratio.
C) increase the current ratio and decrease the inventory turnover ratio.
D) decrease the current ratio and increase the inventory turnover ratio.
Q3) Past performance is rarely a good indicator of future performance.
A)True
B)False
Q4) Days' inventory on hand is used to analyze A) cash flow adequacy.
B) liquidity.
C) profitability.
D) long-term solvency.
Q5) Why is the quick ratio probably better than the current ratio as a measure of short-term liquidity?
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