Basic Accounting Concepts
Final Test Solutions
Course Introduction
This course provides an introduction to fundamental accounting concepts, principles, and practices essential for understanding the financial aspects of business operations. Topics include the accounting cycle, double-entry bookkeeping, preparation and analysis of financial statements, recognition of revenues and expenses, and an overview of assets, liabilities, and equity. The course emphasizes the importance of accuracy and ethical considerations in recording and reporting financial information, laying the groundwork for further studies in accounting and finance.
Recommended Textbook
Survey of Accounting 6th Edition by Carl S. Warren
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15 Chapters
1713 Verified Questions
1713 Flashcards
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2
Chapter 1: The Role of Accounting in Business
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) The branch of accounting related to the management's financial decisions is known as financial accounting.
A)True
B)False
Answer: False
Q2) The stockholders' equity of a company should equal the sum of its total assets and total liabilities.
A)True
B)False
Answer: False
Q3) Which of the following would not be an example of a merchandising business?
A) The Walt Disney Company
B) JCPenney
C) Amazon.com
D) Wal-Mart
Answer: A
Q4) Stockholders of a corporation are its internal stakeholders.
A)True
B)False
Answer: False
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Chapter 2: Basic Accounting Concepts
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89 Verified Questions
89 Flashcards
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Sample Questions
Q1) Which of the following group of accounts are all assets?
A) Cash, Accounts Payable, Buildings
B) Accounts Receivable, Revenue, Cash
C) Prepaid Expenses, Buildings, Patents
D) Unearned Revenues, Prepaid Expenses, Cash
Answer: C
Q2) Johnson, Inc. issued $15,000 in capital stock in exchange for cash. What is the effect of this transaction?
A) Total assets remain unchanged.
B) Cash flow from Financing Activities will increase.
C) Net Income will increase.
D) Total Retained Earnings will increase.
Answer: B
Q3) The payment of utilities expense in cash would affect the operating activities in the statement of cash flows and the income statement but not the balance sheet.
A)True
B)False
Answer: False
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4
Chapter 3: Accrual Accounting Concepts
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) Which of the following is an example of a deferred expense?
A) Prepaid advertising
B) Unearned revenue
C) Accounts payable
D) Accounts receivable
Answer: A
Q2) X&Y Co. received $4,000 in payments from clients for services billed in a previous month. What effect does this transaction have on the accounts under the accrual basis of accounting?
A) Total assets increase by $4,000.
B) Assets will increase by $4,000 and revenues will increase $4,000.
C) Total assets will be decrease by $4,000.
D) The net effect on assets is zero.
Answer: D
Q3) Unearned revenue is what type of an account?
A) Asset
B) Revenue
C) Stockholders' equity
D) Liability
Answer: D
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Chapter 4: Accounting for Merchandising Businesses
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) Details of invoices for purchases of merchandise are as follows: \(\begin{array}{|l|l|l|l|}
\hline\text { Returns and }\\
\text { Allowances}&\text { Terms}&\text { Transportation}&\text { Merchandise}\\
\hline \$ 200 & \text { FOB shipping point, } 1 / 10, \mathrm{n} / 30 & \$ 25 & \text { a. } \$ 1,000 \\
\hline 400 & \text { FOB destination, } 1 / 30 & -- & \text { b. } 5,000 \\
\hline 150 & \text { FOB shipping point, } 2 / 10, \mathrm{n} / 30 & 50 & c .4,000 \\
\hline-- & \text { FOB destination, } 1 / 10,1 / 30 & \text {-- } & \text { d. } 5,000 \\ \hline
\end{array}\)
Determine the amount to be paid in full settlement of each of the invoices, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period. Also assume that the seller has prepaid the transportation expenses.
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Chapter 5: Sarbanes-Oxley, Internal Control, and Cash
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) The purpose of the Sarbanes-Oxley Act of 2002 is to:
A) restore public confidence and trust in the financial statements of publicly held companies.
B) require all companies to prepare financial statements.
C) protect companies from demands of investors, stockholders, and creditors.
D) do all of these.
Q2) What is the purpose of the Sarbanes-Oxley Act of 2002, and why was it enacted?
Q3) Information and communication are essential elements of an organization's internal control.
A)True
B)False
Q4) All bank memorandums reported on the bank reconciliation require entries in the depositor's accounts.
A)True
B)False
Q5) In preparing a bank reconciliation, the amount of a canceled check omitted from the depositor's records is deducted from the cash balance per books.
A)True
B)False
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Chapter 6: Receivables and Inventories
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) At the end of a period before the accounts are adjusted, Allowance for Doubtful Accounts has a balance of $250, and net sales on account for the period total $500,000. If uncollectible accounts expense is estimated at 1% of net sales on account, the current provision to be made for uncollectible accounts expense is $4,997.50.
A)True
B)False
Q2) The amount of the promissory note plus the interest earned on the due date is called the:
A) market value.
B) maturity value.
C) face value.
D) discounted value.
Q3) The two methods of accounting for uncollectible receivables are the allowance method and the:
A) equity method.
B) direct write-off method.
C) interest method.
D) cost method.
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8
Chapter 7: Fixed Assets and Intangible Assets
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) Which method of depreciation considers residual value in computing the normal periodic depreciation?
A) Straight-line
B) MACRS
C) Double-declining-balance
D) Accelerated
Q2) All amounts paid to get an asset in place and ready for use are referred to as:
A) deferred expenditures.
B) revenue expenditures.
C) residual value.
D) cost of an asset.
Q3) If an asset is discarded, a loss is recognized equal to its salvage value.
A)True
B)False
Q4) Which of the following is a fixed asset?
A) Cash
B) Equipment
C) Land held for investment
D) Notes receivable
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Chapter 8: Liabilities and Stockholders Equity
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131 Verified Questions
131 Flashcards
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Sample Questions
Q1) Payroll taxes levied against employees become liabilities:
A) on the first of the following month.
B) at the time the liability for the employees' wages is paid.
C) when earned by the employee.
D) at the end of an accounting period.
Q2) Which of the following is not necessary for a corporation to pay cash dividends?
A) Sufficient cash
B) Formal action of the board of directors
C) Prior declaration of stock dividends
D) Sufficient retained earnings
Q3) The cost of a product warranty should be included as an expense in the:
A) period the cash is collected for a product sold on account.
B) future period when the cost of repairing the product is paid.
C) period of the sale of the product.
D) future period when the product is repaired or replaced.
Q4) If 50,000 shares are authorized, 35,000 shares are issued, and 2,000 shares are reacquired, the number of outstanding shares is 33,000.
A)True
B)False
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Chapter 9: Financial Statement Analysis
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83 Verified Questions
83 Flashcards
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Sample Questions
Q1) Thomson Company reported the following on its income statement: \(\begin{aligned}
\$ 420,000 & \text { Income before income taxes } \\ 120,000 & \text { Income tax expense } \\
\$ 300,000 & \text { Net income } \end{aligned}\)
An analysis of the income statement revealed that interest expense was $40,000. Thomson Company's number of times interest charges are earned was:
A) 8 times.
B) 7.5 times.
C) 9.5 times.
D) 11.5 times.
Q2) The ratio of the sum of cash and other current assets that can be easily converted to cash to current liabilities is called as:
A) price-earnings ratio.
B) earnings ratio.
C) quick ratio.
D) current ratio.
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Chapter 10: Accounting Systems for Manufacturing Businesses
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Activity-based costing is a method of accumulating and allocating costs by department.
A)True
B)False
Q2) A job order cost system provides for a separate record of the costs for each particular quantity of product that is manufactured.
A)True
B)False
Q3) Which of the following is not a product cost?
A) CEO salary
B) Depreciation on factory equipment
C) Wages of an assembly worker
D) Silicon wafers for microcomputer chips
Q4) For an automotive repair shop, the wages of mechanics would be classified as direct labor cost.
A)True
B)False
Q5) The current year's advertising costs are normally considered as product costs. A)True
B)False
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Chapter 11: Cost Behavior and Cost-Volume-Profit Analysis
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) If sales total $1,000,000, fixed costs total $200,000, and variable costs are 55% of the sales, the contribution margin ratio is 55%.
A)True
B)False
Q2) Cost behavior refers to the manner in which:
A) a cost changes as the related activity changes.
B) a cost is allocated to products.
C) a cost is used in setting selling prices.
D) a cost is estimated.
Q3) If the contribution margin ratio for Harrison Company is 38%, sales were $425,000, and fixed costs were $100,000, what was the income from operations?
A) $163,500
B) $161,500
C) $54,730
D) $61,500
Q4) A rental cost of $40,000 plus $0.50 per machine hour of use is an example of a mixed cost.
A)True
B)False
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Chapter 12: Differential Analysis and Product Pricing
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Sample Questions
Q1) Kirk Co. manufactures mobile cellular equipment and develops a price for the product by using a variable cost concept. Kirk incurs variable costs of $1,900,000 in the production of 100,000 units. Fixed costs total $50,000. The company employs $4,725,000 of assets and wishes to earn a profit equal to a 10% rate of return on assets.
(a)Compute a markup percentage based on the variable costs concept.
(b) Detemine a selling price.
Q2) Assume that Marlow Co. is considering disposing of equipment that cost $200,000 and has $160,000 of accumulated depreciation to date. Marlow Co. can sell the equipment through a broker for $100,000 less 5% commission. Alternatively, Minton Co. has offered to lease the equipment for five years for a total of $195,000. Marlow will incur repair, insurance, and property tax expenses estimated at $40,000. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is:
A) $55,000.
B) $20,000.
C) $100,000.
D) $60,000.
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Page 14
Chapter 13: Budgeting and Standard Cost Systems
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168 Verified Questions
168 Flashcards
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Sample Questions
Q1) If the standard to produce a given amount of product is 2,000 units of direct materials at $12 and the actual was 1,600 units at $13, the direct materials quantity variance was $4,800 favorable.
A)True
B)False
Q2) The budget process involves all of the following except:
A) establishing specific goals.
B) executing plans to achieve the goals.
C) periodically comparing actual results with the goals.
D) dismissing all managers who fail to achieve operational goals specified in the budget.
Q3) The budgeted volume of production is normally computed as the sum of (1) the expected sales volume and (2) the desired ending inventory.
A)True
B)False
Q4) A variable cost system is an accounting system where standards are set for each manufacturing cost element.
A)True
B)False
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15
Chapter 14: Performance Evaluation for Decentralized Operations
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the profit margin calculated would be 20%.
A)True
B)False
Q2) Espinosa Corporation had $220,000 invested in assets, sales of $242,000, income from operations amounting to $48,400, and a desired minimum rate of return of 3%. The rate of return on investment for Espinosa is:
A) 20%.
B) 22%.
C) 3%.
D) 6.4%.
Q3) The minimum amount of desired divisional income from operations is set by top management by establishing a maximum rate of return that is expected from the invested assets.
A)True
B)False
Q4) The ratio of sales to invested assets is termed investment turnover.
A)True
B)False
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Chapter 15: Capital Investment Analysis
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103 Flashcards
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Sample Questions
Q1) The internal rate of return method of analyzing capital investment proposals uses the present value concept to compute the rate of return expected from the proposals.
A)True
B)False
Q2) If the rate of earnings is 10% and the cash to be received in two years is $10,000, determine the present value amount, using the following partial table of present value of $1 at compound interest. \(\begin{array}{|l|l|l|l|}
\hline 12 \% & 10 \% & 6 \% & \text { Year } \\
\hline 0.893 & 0.909 & 0.943 & 1 \\
\hline 0.797 & 0.826 & 0.890 & 2 \\
\hline 0.712 & 0.751 & 0.840 & 3 \\
\hline 0.636 & 0.683 & 0.792 & 4 \\
\hline
\end{array}\)
A) $8,900
B) $8,260
C) $7,970
D) $9,090
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Page 17