Accounting Principles
Chapter Exam Questions
Course Introduction
Accounting Principles provides an introduction to the fundamental concepts and techniques used in the accounting field. Students learn the theoretical foundations of accounting, including the accounting cycle, double-entry bookkeeping, and preparation of financial statements such as the income statement, balance sheet, and statement of cash flows. The course emphasizes the use and interpretation of accounting information in decision-making processes, covering essential topics such as accruals, deferrals, internal controls, and ethical considerations. It is designed to equip students with the necessary skills to understand and apply basic accounting principles in both personal and professional contexts.
Recommended Textbook
Fundamental Financial Accounting Concepts 10th Edition by Thomas P Edmonds
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2
Chapter 1: An Introduction to Accounting
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Sample Questions
Q1) As of December 31,Year 1,Mason Company had $500 cash.During Year 2,Mason earned $1,200 of cash revenue and paid $800 of cash expenses.What is the amount of cash that will be reported on the balance sheet at the end of Year 2?
A)$900
B)$400
C)$1,700
D)$2,500
Answer: A
Q2) All of a business's temporary accounts appear on the income statement.
A)True
B)False
Answer: False
Q3) In which section of a statement of cash flows would the payment of cash dividends be reported?
A)Investing activities.
B)Operating activities.
C)Financing activities.
D)Dividends are not reported on the statement of cash flows.
Answer: C
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Page 3
Chapter 2: Accounting for Accruals and Deferrals
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Q1) The Sarbanes-Oxley Act includes several significant reforms that affect the auditing profession,but it did not reduce an audit firm's ability to provide non-audit services to its audit clients.
A)True
B)False Answer: False
Q2) Companies that use accrual accounting recognize revenues and expenses at the time that cash is received or paid,respectively.
A)True
B)False Answer: False
Q3) Which of the following is frequently used to describe the expenses that are matched in the same accounting period in which they are incurred?
A)Market expenses
B)Matching expenses
C)Period costs
D)Working costs
Answer: C
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4
Chapter 3: The Double-Entry Accounting System
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Sample Questions
Q1) The general journal is a list of a business's accounts and their account numbers.
A)True
B)False Answer: False
Q2) The T-account format is also called the chart of accounts.
A)True
B)False Answer: False
Q3) Warren Company began the accounting period with a $32,000 debit balance in its accounts receivable account.During the accounting period,the company recorded revenue on account amounting to $88,000.The accounts receivable account at the end of the accounting period contained a $16,000 debit balance.Based on this information,what is the amount of cash collected from customers during the period?
A)$104,000
B)$40,000
C)$72,000
D)$84,000
Answer: A
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Chapter 4: Accounting for Merchandising Businesses
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Sample Questions
Q1) If a company uses the periodic inventory system,it records inventory purchases in the Purchases account at the time of purchase.
A)True
B)False
Q2) What happens when merchandise is delivered FOB shipping point?
A)The buyer pays the freight cost.
B)The seller pays the freight cost.
C)The buyer records transportation cost as an expense.
D)The seller records transportation-out expense.
Q3) What is (are)the term(s)used to describe a discount given to encourage prompt payment?
A)Cash discount.
B)Sales discount by the seller.
C)Purchase discount by the buyer.
D)All of these answer choices are correct.
Q4) Merchandising businesses include retail companies and manufacturing companies. A)True
B)False
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Chapter 5: Accounting for Inventories
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Sample Questions
Q1) Assuming Chase uses a LIFO cost flow method,what is the amount of cost of goods sold for the sales transaction on January 18?
A)$1,150
B)$1,050
C)$1,070
D)$1,130
Q2) Koontz Company uses the perpetual inventory method and the weighted-average method.On January 1,Year 1,the company's first day of operations,Koontz purchased 400 units of inventory that cost $7.50 each.On January 10,Year 1,the company purchased an additional 600 units of inventory that cost $9.00 each.If the company sells 550 units of inventory,what is the amount of inventory that would appear on the balance sheet immediately following the sale?
A)$3,780
B)$4,738
C)$3,080
D)$3,713
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Chapter 6: Internal Control and Accounting for Cash
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Sample Questions
Q1) A business learns about customers' NSF checks through debit memos that are included with the bank statement.
A)True
B)False
Q2) On April 30,Midwest Company established a petty cash fund of $1,000.On May 1,a disbursement of $355 was made from the fund for payment of delivery expense.What entry should be made on May 1 to record this disbursement?
A)Debit delivery expense and credit cash for $355.
B)Debit petty cash and credit cash for $355.
C)Debit delivery expense and credit petty cash for $355.
D)No entry is necessary on May 1.
Q3) Most audits result in unqualified audit opinions.
A)True
B)False
Q4) All journal entries made related to bank reconciliations include an expense or revenue account.
A)True
B)False
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8
Chapter 7: Accounting for Receivables
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Sample Questions
Q1) On January 1,Year 1,the Accounts Receivable balance was $37,000 and the balance in the Allowance for Doubtful Accounts was $2,800.On January 15,Year 1,an $800 uncollectible account was written-off.What is the net realizable value of accounts receivable immediately after the write-off?
A)$36,200
B)$33,400
C)$35,000
D)$34,200
Q2) The net realizable value of accounts receivable is the amount of receivables a company expects to collect.
A)True
B)False
Q3) The best estimate of the amount of cash a company expects to collect from its accounts receivable is the face value of the receivables.
A)True
B)False
Q4) The direct write-off method overstates assets on the balance sheet.
A)True
B)False
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Chapter 8: Accounting for Long-Term Operational Assets
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Sample Questions
Q1) On January 1,Year 1,Dinwiddie Company purchased a car that cost $45,000.The car has an expected useful life of 5 years and a $10,000 salvage value.Which of the following statements is true?
A)The total amount of depreciation expense recognized over the six-year useful life will be greater under the double-declining-balance method than the straight-line method.
B)The amount of depreciation expense recognized in Year 4 would be greater if Dinwiddie depreciates the car under the straight-line method than if the double-declining-balance method is used.
C)At the end of Year 2,the amount in accumulated depreciation account will be less if the double-declining-balance method is used than it would be if the straight-line method is used.
D)None of these statements is true.
Q2) The cost of natural resources includes the purchase price,as well as exploration costs and surveys.
A)True
B)False
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Chapter 9: Accounting for Current Liabilities and Payroll
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Sample Questions
Q1) At the end of Year 1,Durango Company recorded an adjusting entry for its obligation under product warranties.During Year 2,it paid cash to settle warranty claims from its customers.The Year 2 warranty settlements are asset use transactions.
A)True
B)False
Q2) Based on this information alone,what is the amount of net income (loss)that will be reported on the Year 2 income statement?
A)$770
B)$630
C)$(190)
D)$1,890
Q3) What type of account is Discount on Notes Payable?
A)Contra liability
B)Liability
C)Contra asset
D)Expense
Q4) The current ratio is calculated as total current assets divided by total assets.
A)True
B)False
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Chapter 10: Accounting for Long-Term Debt
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Sample Questions
Q1) What is the carrying value of the bond liability at December 31,Year 3?
A)$241,000
B)$242,500
C)$237,500
D)$245,000
Q2) A line of credit typically has an interest rate that is fixed (constant)for the length of the agreement.
A)True
B)False
Q3) The effective interest rate method of amortizing bond discounts and premiums results in a constant amount of interest expense every period.
A)True
B)False
Q4) What is the interest expense for Year 1 and Year 2,respectively? (Round your final answers to the nearest dollar. )
A)$3,200 and $14,000
B)$16,000 and $16,350
C)$16,000 and $13,273
D)$20,625 and $16,000
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Chapter 11: Proprietorships,partnerships,and Corporations
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Sample Questions
Q1) Curtain Co.paid dividends of $6,000,$12,000,and $20,000 during Year 1,Year 2,and Year 3,respectively.The company had 1,000 shares of 5%,$200 par value preferred stock outstanding that paid a cumulative dividend.What is the total amount of dividends paid to common shareholders during Year 3?
A)$4,000
B)$6,000
C)$8,000
D)$10,000
Q2) At the end of the accounting period,Houston Company had $12,000 of common stock,paid-in capital in excess of par value-common of $11,000,retained earnings of $12,000,and $4,000 of treasury stock.What is the total amount of stockholders' equity?
A)$37,000
B)$39,000
C)$19,000
D)$31,000
Q3) A corporation must record a liability for cash dividends on the date of record.
A)True
B)False
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Chapter 12: Statement of Cash Flows
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Sample Questions
Q1) Rapid growth of a company can cause it to be short of cash.
A)True
B)False
Q2) For the year ended December 31,Year 1,Fields Company made cash payments of $50,000 for dividends,paid interest of $20,500,paid $30,000 cash to suppliers,and purchased equipment for $64,000 cash.What is the net cash used by investing activities for Year 1?
A)$114,000
B)$64,000
C)$20,500
D)$134,500
Q3) How are cash receipts from interest on a note receivable classified on a statement of cash flows prepared using the direct method?
A)Operating activity
B)Investing activity
C)Financing activity
D)Noncash financing and investing activity
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Working capital is current assets minus current liabilities.
A)True
B)False
Q2) Which of the following is (are)objective(s)of ratio analysis?
A)Assessing past performance.
B)Assessing the prospects for future performance.
C)Analyzing how a company finances its operations.
D)All of these answers are correct.
Q3) You are considering an investment in IBM stock and wish to assess the firm's long-term debt-paying ability and its use of debt financing.All of the following ratios can be used to assess solvency except:
A)Number of times interest is earned.
B)Debt to assets ratio.
C)Debt to equity ratio.
D)Net margin.
Q4) Which of the following statements regarding the quick ratio is not true?
A)The quick ratio is also known as the acid-test ratio.
B)The quick ratio ignores some current assets that are less liquid than others.
C)The quick ratio is a conservative variation of the current ratio.
D)The quick ratio equals quick assets divided by total liabilities.
Page 15
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