Accounting Principles II
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Course Introduction
Accounting Principles II builds upon foundational accounting concepts by introducing students to more advanced topics in financial accounting. The course emphasizes the preparation and interpretation of financial statements for corporations, with a focus on inventory valuation, long-term assets, liabilities, stockholders' equity, and cash flow analysis. Students will also explore the principles of internal controls and the ethical considerations in the accounting process. Through practical exercises and case studies, students develop skills in analyzing financial information and making informed business decisions. This course is essential for those pursuing careers in accounting, finance, or business management.
Recommended Textbook
Accounting 9th Canadian Edition Volumer II by Charles
T. Horngren
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Chapter 12: Corporations: Paid-In Capital and the Balance Sheet
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Sample Questions
Q1) What is the total amount of dividends that will be paid to the common shareholders?
A) $40,000
B) $32,000
C) $400
D) $4,500
Q2) When a company records the year-end closing entries, the Income summary balance, before it is closed to Retained earnings, should be equal to the Net income or Net loss for the year.
A)True
B)False
Q3) No gains or losses are ever recorded by a company when they sell or issue shares of their own stock.
A)True
B)False
Q4) Which of the following is a disadvantage of the corporate form of business?
A) Separation of ownership and management
B) Continuous life
C) The potential to raise large amounts of capital
D) No mutual agency
3
Chapter 13: Corporations: Effects on Retained Earnings and the Income Statement
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Sample Questions
Q1) On December 1, 2013, Arbor Company had 20,000 shares of $1 par value common stock issued and outstanding. The next day they distributed a 50% stock dividend. The market value of the stock on that date was $9 per share. Please provide the journal entry for the transaction.
\[\begin{array} { | l | l | l | }
\hline
\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad&\quad \quad\quad\quad &\quad\quad\quad \\
\hline & & \\
\hline
\end{array}\]
Q2) If Petra Sales purchases an additional 5,000 shares of treasury stock at $14 per share, what journal entry is required?
A) Debit Cash $70,000 and credit Treasury stock $70,000.
B) Debit Treasury stock $70,000 and credit Cash $70,000.
C) Debit Treasury stock $70,000 and credit Sales revenue $70,000.
D) Debit Treasury stock $60,000, debit Paid-in capital $10,000 and credit Cash $70,000.
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Page 4
Chapter 14: The Statement of Cash Flows
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Sample Questions
Q1) Harrison Company uses the indirect method to prepare its statement of cash flows. Please refer to the following information for the year 2014:
Retained earnings, beginning balance: $125,000
Retained earnings, ending balance: $117,000 Company reported net loss of $8,000 for the year. What was the amount of dividends paid during the year?
A) $5,000
B) $2,000
C) Zero
D) $3,000
Q2) Buying property, plant and equipment would be considered a cash outflow from financing.
A)True
B)False
Q3) The change in accrued liabilities will be shown as a positive cash flow in the adjustments to Net income.
A)True
B)False
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5
Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) What does the debt-to-equity ratio show?
A) The proportion of a company's total financing that is accomplished by borrowing
B) The amount of profit earned by one share of common stock
C) The ability of a company to pay off its current liabilities
D) The potential for growth in the price of a share of stock
Q2) Which of the following factors might suggest that a company is having difficulty selling its inventory?
A) An increase in receivables
B) A buildup of inventory balances
C) An increase in total debt
D) An increase in interest expense
Q3) The times-interest-earned ratio shows a creditor the firm's ability to pay interest on debt.
A)True
B)False
Q4) The accounts receivable turnover is an indicator of the ability of a company to collect cash from its credit customers.
A)True
B)False
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Chapter 16: Introduction to Management Accounting
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Sample Questions
Q1) Which of the following BEST describes just-in-time inventory management?
A) Production system that stores surplus goods at each stage of manufacture
B) Inventory purchasing process that gains purchase discounts by buying in large quantities
C) Production system that focuses on delivering materials and goods in exactly the right quantity when needed
D) Inventory system which stockpiles raw materials to protect against supply interruptions
Q2) All of the following are examples of manufacturing overhead EXCEPT for:
A) utilities incurred in the factory.
B) insurance on factory equipment.
C) wages of assembly line workers.
D) indirect materials.
Q3) How much are Wright Company's inventoriable product costs for 2009?
A) $925,000
B) $605,000
C) $975,000
D) $1,025,000
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Chapter 17: Job Order and Process Costing
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Sample Questions
Q1) Rankin Food Products produces cane sugar syrup in bulk quantities, and uses process costing. There are three processing departments-Mixing, Refining, and Packaging. Using process costing analysis, Rankin determined that the cost of the units completed and transferred out of the Mixing Department during the month was $11,000. Which of the following is the correct journal entry to record the cost of the units completed and transferred out to the next department?
A) Debit $11,000 to Finished goods inventory, credit $11,000 to Work in process - Mixing
B) Debit $11,000 to Work in process - Refining, credit $11,000 to Work in process - Mixing
C) Debit $11,000 to Work in process - Refining, credit $11,000 to Materials inventory
D) Debit $11,000 to Work in process - Mixing, credit $11,000 to Work in process - Refining
Q2) How much manufacturing overhead was allocated to the job?
A) $16,250
B) $10,400
C) $5,000
D) $34,375
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Chapter 18: Activity-Based Costing and Other Cost Management Tools
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Sample Questions
Q1) Use the T-accounts shown above to record the transactions, and then answer the following question:
After transaction number 5, what was the balance in the Finished goods inventory account?
A) $3,900
B) $7,400
C) $13,900
D) $6,900
Q2) What is the cost of assembling per tire?
A) $15.40
B) $7.00
C) $14.00
D) $28.00
Q3) The lost profits from losing customers would come under which of the following categories?
A) Prevention cost
B) Appraisal cost
C) External failure cost
D) Internal failure cost
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Chapter 19: Cost-Volume-Profit Analysis
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Sample Questions
Q1) How much is the fixed portion of the total cost?
A) $2,050
B) $1,960
C) $2,500
D) $250
Q2) Ace Card Company has variable costs of $0.40 per unit of product. The remainder of its production costs are fixed. In May, the volume was 12,000 units and the total production costs were $6,900. How much are the fixed costs?
A) $2,100
B) $2,200
C) $1,950
D) $2,025
Q3) Chambers Company sells glass vases at a wholesale price of $2.50 per unit. Variable cost is $1.75 per unit. Chambers' fixed costs are $6,500 per month. If Chambers wishes to make operating income of $2,500, how many units must be sold?
A) 11,500
B) 11,750
C) 12,000
D) 12,500
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Chapter 20: Short-Term Business Decisions
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Sample Questions
Q1) Managers' decisions are based primarily on quantitative data because the qualitative factors are NOT usually relevant to the decision making process.
A)True
B)False
Q2) Perfect Time Company manufactures and sells watches for $36 each. Value Products Company has offered Perfect Time $16 per watch for a one time order of 1,000 watches. The total manufacturing cost per watch, using standard absorption costing, is $24 per unit, and consists of variable costs of $18 per watch and fixed overhead costs of $6 per watch. Assume that Perfect Time has excess capacity and that the special order would not adversely impact regular sales. What is the change in operating income that would result from accepting the special sales order?
A) Increase of $2,000
B) Decrease of $18,000
C) Increase of $16,000
D) Decrease of $2,000
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11
Chapter 21: Capital Investment Decisions and the Time
Value of Money
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Sample Questions
Q1) Which capital budgeting method uses accrual accounting, rather than net cash flows, as a basis for calculations?
A) Payback
B) Rate of return
C) Net present value
D) Internal rate of return
Q2) Short-term investment decisions are inherently riskier than long-term decisions because they have a shorter period in which to recoup the investment.
A)True
B)False
Q3) A post-audit is an analysis of an investment that is made after the investment is underway or completed.
A)True
B)False
Q4) Capital rationing is when a company has limited resources, and it must find ways to reduce operating expenses in all of its divisions and units.
A)True
B)False
Page 12
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Chapter 22: The Master Budget and Responsibility Accounting
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Sample Questions
Q1) Hi-value Products Company is creating an operating budget for the 3<sup>rd</sup> quarter and will begin with a sales budget. Budgeted sales are $100,000 in July, $120,000 in August, and $160,000 in September. 75% of sales are cash and 25% of sales are on account. Please use the following format and prepare a sales budget. \(\begin{array}{|l|l|l|l|}
\hline \text { Sales Budget } & \text { Jul } & \text { Aug } & \text { Sep } \\
\hline \text { Cash sales: } 75 \% & & & \\
\hline \text { Credit sales: } 25 \% & & & \\
\hline \text { Total sales } & & & \\
\hline \end{array}\)
Q2) The starting point in the budgeting process is the preparation of the:
A) cash budget.
B) budgeted statement of cash flows.
C) sales budget.
D) budgeted income statement.
Q3) The cash budget can be prepared before the sales budget.
A)True
B)False
Page 13
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Chapter 23: Flexible Budgets and Standard Costs
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Sample Questions
Q1) When a manufacturing company uses standard costing methodology in their journal entries and accounts, a favorable variance has the effect of being a contra expense.
A)True B)False
Q2) At the end of the year, the spending (price) variance for variable overhead is favorable.
A)True B)False
Q3) The production manager of a company was experiencing high defect rate on the assembly line, which was slowing production and causing wastage of valuable materials. He decided to purchase a higher grade of material which would be more reliable, but he was worried that the cost of the new material might negatively impact operating income. This situation could have produced which of the following variances?
A) Unfavorable materials price variance
B) Favorable labor price variance
C) Favorable labor efficiency variance
D) Unfavorable materials efficiency variance
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Chapter 24: Performance Evaluation and the Balanced Scorecard
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Sample Questions
Q1) Which of the following is NOT a potential advantage of decentralization?
A) Top management can use their time to concentrate on long-term strategic planning rather than daily operations.
B) Customer relations are generally improved.
C) It improves the motivation and retention of division managers.
D) Decentralization promotes goal congruence and coordination.
Q2) Many companies use a balanced scorecard for performance evaluation. The balanced scorecard has four business perspectives, and utilizes KPIs to evaluate performance in various areas. Which of the following KPIs would relate to the internal business perspective?
A) Hours of employee training
B) Number of warranty claims
C) Percentage of market share
D) Return on investment
Q3) The production line at Gateway Computers is most likely treated as a(n):
A) cost center.
B) revenue center.
C) profit center.
D) investment center.
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