Accounting Principles
Exam Bank
Course Introduction
Accounting Principles introduces students to the foundational concepts and practices of financial accounting. The course covers essential topics such as the accounting cycle, double-entry bookkeeping, preparation and analysis of financial statements, and the interpretation of key financial data. Emphasis is placed on understanding generally accepted accounting principles (GAAP), ethical considerations, and the role of accounting in business decision-making. By the end of the course, students will have developed the skills needed to record, classify, and summarize financial transactions, enabling them to better assess the financial health of organizations.
Recommended Textbook
Financial Accounting 15th Edition by Carl Warren
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17 Chapters
3465 Verified Questions
3465 Flashcards
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Page 2
Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) Donner Company is selling a piece of land adjacent to its business.An appraisal reported the market value of the land to be $120,000.Focus Company initially offered to buy the land for $107,000.The companies settled on a purchase price of $115,000.On the same day,another piece of land on the same block sold for $122,000.Under the cost concept,what amount will be used to record this transaction in the accounting records?
Answer: $115,000
Q2) Net income and net profit do not mean the same thing.
A)True
B)False
Answer: False
Q3) A modular homebuilder
A)Service business
B)Manufacturing business
C)Merchandising business
Answer: B
Q4) What information does the income statement give to business users?
Answer: The income statement reports the revenues and expenses for a period of time.The result is either a net income or a net loss.
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Chapter 2: Analyzing Transactions
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Sample Questions
Q1) Which of the following accounts is an owner's equity account?
A)Cash
B)Accounts Payable
C)Prepaid Insurance
D)Ross Morris, Capital Answer: D
Q2) On October 10,Nickle Company purchased supplies for $1,800 on account.On October 25,Nickle Company paid the invoice.
(a)Provide the journal entry for the purchase on account.
(b)Provide the journal entry for the payment of the invoice. Answer: 11ea8d32_2879_2361_b445_4306e4eb28e5_TB6239_00
Q3) The erroneous arrangement of digits,such as writing $45 as $54,is called a slide.
A)True
B)False Answer: False
Q4) A transaction that is recorded in the journal is called a journal entry.
A)True
B)False Answer: True
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) At the end of the fiscal year,the usual adjusting entry to prepaid insurance to record expired insurance was omitted.Which of the following statements is true?
A)Total assets at the end of the year will be understated.
B)Owner's equity at the end of the year will be understated.
C)Net income for the year will be overstated.
D)Insurance expense will be overstated.
Answer: C
Q2) Prepaid expenses have
A)not yet been recorded as expenses but have been paid
B)been recorded as expenses and paid
C)been incurred and paid
D)not yet been recorded as expenses
Answer: D
Q3) Deferrals are recorded transactions that delay the recognition of an expense or revenue.
A)True
B)False
Answer: True
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) The ability to convert assets into cash is called liquidity.
A)True
B)False
Q2) Assets,liabilities,and owner's capital are real accounts and do not get closed at the end of the period.
A)True
B)False
Q3) Use the adjusted trial balance for Stockton Company.Determine the owner's equity ending balance.
A)$12,150
B)$15,730
C)$6,480
D)$21,400
Q4) The income statement should be prepared
A)before the statement of owner's equity and balance sheet
B)after the statement of owner's equity and before the balance sheet
C)after the statement of owner's equity and balance sheet
D)after the balance sheet and before the statement of owner's equity
Q5) Explain how net income or loss is determined by using the end-of-period spreadsheets.
6
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Chapter 5: Accounting Systems
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Sample Questions
Q1) The goal of systems design is to
A)determine when to implement a system
B)meet user needs
C)determine the size of the competitor's system
D)make changes to the present system
Q2) A withdrawal of cash made by the owner will be found in the
A)cash receipts journal
B)cash payments journal
C)revenue journal
D)purchases journal
Q3) The Other Accounts column in the cash receipts journal is used for recording debits to any account for which there is no special debit column.
A)True
B)False
Q4) Even when special journals are used,a personal withdrawal of cash is recorded in the general journal.
A)True
B)False
Q5) Define the meaning of the terms B2C and B2B as they relate to e-commerce.
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Chapter 6: Accounting for Merchandising Businesses
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Sample Questions
Q1) In the merchandising income statement,sales will be reduced by administrative expenses to arrive at operating income.
A)True
B)False
Q2) When goods are shipped FOB destination and the seller pays the freight charges,the buyer
A)journalizes a reduction for the cost of the merchandise
B)journalizes a reimbursement to the seller
C)does not take a discount
D)makes no journal entry for the freight
Q3) Generally,the revenue account for a merchandising business is entitled
A)Sales
B)Fees Earned
C)Gross Sales
D)Gross Profit
Q4) If the buyer bears the freight costs related to a purchase,the terms are said to be FOB destination.
A)True
B)False
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Chapter 7: Inventories
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Sample Questions
Q1) During periods of decreasing costs,the use of the LIFO method of costing inventory will result in a lower amount of net income than would result from the use of the FIFO method.
A)True
B)False
Q2) Ending inventory is made up of the oldest purchases when a company uses
A)first-in, first-out
B)last-in, first-out
C)average cost
D)retail method
Q3) The firm uses the periodic system,and there are 20 units of the commodity on hand at the end of the year.What is the amount of inventory at the end of the year according to the FIFO method?
A)$655
B)$620
C)$690
D)$659
Q4) Inventory errors,if not discovered,will self-correct within two years.
A)True
B)False
Page 9
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Chapter 8: Internal Control and Cash
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Sample Questions
Q1) In preparing a bank reconciliation,the amount indicated by a debit memo for bank service charges is added to the balance per company's records.
A)True
B)False
Q2) A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430.What entry is required in the company's accounts?
A)debit Accounts Payable; credit Cash
B)debit Cash; credit Accounts Receivable
C)debit Cash; credit Accounts Payable
D)debit Accounts Receivable; credit Cash
Q3) Error in recording a check
A)Bank statement adjustment
B)Company books adjustment
C)Either
Q4) A petty cash fund is used to pay relatively large amounts.
A)True
B)False
Q5) Describe the features of a voucher system and list typical supporting documents for a voucher.
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Chapter 9: Receivables
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Sample Questions
Q1) Jefferson uses the percent of sales method of estimating uncollectible expenses.Based on past history,2% of credit sales are expected to be uncollectible.Sales for the current year are $5,550,000.Which of the following is correct?
A)Uncollectible accounts are estimated to be $55,500.
B)Uncollectible accounts are estimated to be $111,000.
C)Bad debt expense is estimated to be $5,550.
D)Bad debt expense is estimated to be $11,100.
Q2) Notes Receivable and Accounts Receivable can also be called trade receivables.
A)True
B)False
Q3) An account becomes uncollectible
A)when an account receivable is converted into a note receivable
B)when a discount is availed on notes receivable
C)There is no general rule for when an account becomes uncollectible.
D)at the end of the fiscal year
Q4) The direct write-off method of accounting for uncollectible accounts
A)emphasizes balance sheet relationships
B)is often used by small companies and companies with few receivables
C)emphasizes cash realizable value
D)emphasizes the matching of expenses with revenues
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Chapter 10: Long-Term Assets: Fixed and Intangible
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Sample Questions
Q1) Repairs made to used office equipment
A)Buildings
B)Machinery and equipment
C)Land
D)Land improvements
Q2) Regardless of the depreciation method,the amount that will be depreciated during the life of the asset will be the same.
A)True
B)False
Q3) Location of a company
A)Patent
B)Copyright
C)Trademark
D)Goodwill
Q4) Landscaping at new business location
A)Buildings
B)Machinery and equipment
C)Land
D)Land improvements
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Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) Employers are required to compute and report payroll taxes on a calendar-year basis,even if a different fiscal year is used for financial reporting and income tax purposes.
A)True
B)False
Q2) Hall Company sells merchandise with a one-year warranty.In the current year,sales consist of 4,500 units.It is estimated that warranty repairs will average $10 per unit sold and 30% of the repairs will be made in the current year and 70% in the next year.In the current year's income statement,Hall should show warranty expense of
A)$45,000
B)$13,500
C)$31,500
D)$0
Q3) An employee's take-home pay is equal to gross pay less all voluntary deductions.
A)True
B)False
Q4) Kelly Howard has the following transactions.Prepare the journal entries.
Q5) List five internal controls that relate directly to payroll.
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Chapter 12: Accounting for Partnerships and Limited Liability Companies
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Sample Questions
Q1) Each partner has a separate capital and withdrawal account.
A)True
B)False
Q2) Abby and Bailey are partners who share income in the ratio of 2:1 and have capital balances of $60,000 and $30,000,respectively.With the consent of Bailey,Sandra buys one-half of Abby's interest for $35,000.For what amount will Abby's capital account be debited to record admission of Sandra to the partnership?
A)$40,000
B)$15,000
C)$35,000
D)$30,000
Q3) Partners Ken and Macki each have a $40,000 capital balance and share income and losses in the ratio of 3:2.Cash equals $20,000,noncash assets equal $120,000,and liabilities equal $60,000.If the noncash assets are sold for $50,000,and each partner is personally insolvent,Partner Macki will eventually receive cash of
A)$0
B)$10,000
C)$12,000
D)$20,000
Page 14
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Chapter 13: Corporations: Organization, stock Transactions, and Dividends
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Sample Questions
Q1) The declaration of a cash dividend decreases a corporation's stockholders equity and decreases its assets.
A)True
B)False
Q2) Oregon,Inc.reported net income of $105,000.During the current year,the company had 5,000 shares of $100 par,5% preferred stock and 10,000 shares of $5 par common stock outstanding.Oregon's earnings per share is
A)$8.00
B)$18.00
C)$5.08
D)$5.00
Q3) Which of the following amounts should be disclosed in the Stockholders' equity section of the balance sheet?
A)the number of shares of common stock outstanding
B)the number of shares of common stock issued
C)the number of shares of common stock authorized
D)All of these choices
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Page 15
Chapter 14: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) A corporation issues for cash $9,000,000 of 8%,30-year bonds,interest payable semiannually.The amount received for the bonds will be
A)present value of 60 semiannual interest payments of $360,000, plus present value of $9,000,000 to be repaid in 30 years
B)present value of 30 annual interest payments of $720,000
C)present value of 30 annual interest payments of $360,000, plus present value of $9,000,000 to be repaid in 30 years
D)present value of $9,000,000 to be repaid in 30 years, less present value of 60 semiannual interest payments of $360,000
Q2) If the contract rate is less than the effective rate
A)Contract rate
B)Effective rate
C)Bond discount
D)Bond premium
E)Bond
F)Bond indenture
G)Principal
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Chapter 15: Investments and Fair Value Accounting
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Sample Questions
Q1) On June 1,$40,000 of treasury bonds were purchased between interest dates.The brokerage commission was $600.The bonds pay interest at 12%,which is paid semiannually on January 1 and July 1.How much interest revenue will be recorded on July 1?
A)$400
B)$406
C)$2,000
D)$2,400
Q2) A balance sheet account where the fair value adjustment for investments is reported
A)Equity method
B)Parent company
C)Subsidiary company
D)Consolidated financial statements
E)Fair value
F)Unrealized gain or loss on investments.
G)Valuation allowance for investments
H)Dividend yield
I)Amortized cost
J)Cost method
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Page 17
Chapter 16: Statement of Cash Flows
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Sample Questions
Q1) The board of directors declared cash dividends totaling $168,000 during the year.The comparative balance sheet indicated dividends payable of $46,000 at the beginning of the year and $42,000 at the end of the year.What was the amount of cash payments to stockholders during the year?
Q2) Accounts receivable from sales transactions were $51,000 at the beginning of the year and $64,000 at the end of the year.Net income reported on the income statement for the year was $105,000.Exclusive of the effect of other adjustments,the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method would be
A)$105,000
B)$118,000
C)$92,000
D)$169,000
Q3) Preferred stock issued in exchange for land would be reported on the statement of cash flows in
A)the Cash flows from financing activities section
B)the Cash flows from investing activities section
C)a separate schedule
D)the Cash flows from operating activities section
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Chapter 17: Financial Statement Analysis
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Q1) Assuming that the quantities of inventory on hand during the current year were sufficient to meet all demands for sales,a decrease in the inventory turnover for the current year when compared with the turnover for the preceding year indicates an improvement in inventory management.
A)True
B)False
Q2) Current position analysis is used by short-term creditors to assess how quickly they will be repaid.
A)True
B)False
Q3) The particular analytical measures chosen to analyze a company may be influenced by all of the following except
A)industry type
B)general economic environment
C)diversity of business operations
D)product quality or service effectiveness
Q4) The denominator of the return on total assets ratio is the average total assets.
A)True
B)False
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