Basics of Accounting Question Bank
Course Introduction
Basics of Accounting introduces students to the fundamental principles and concepts of financial accounting. The course covers the accounting cycle, including recording financial transactions, preparing financial statements, and understanding assets, liabilities, and equity. Students will learn how to analyze and interpret basic financial information to support decision-making within an organization. Emphasis is placed on the importance of ethical practices and the role of accounting in business operations. This course provides a solid foundation for further study in accounting and finance.
Recommended Textbook
Horngrens Financial and Managerial Accounting The Managerial Chapters 5th Edition by Miller
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Page 2
Chapter 1: Accounting and the Business Environment
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Sample Questions
Q1) Glendale Corporation had the following transactions in August: Earned $5,000 of revenues on account; collected $5,000 from a customer for services provided last month; incurred $500 of repair expense and paid cash; paid $600 for rent that it owed from the previous month.
What is the net income in August?
A)$500
B)$5,000
C)$9,500
D)$4,500
Answer: D
Q2) Corporations pay their own income tax on corporate income.Stockholders pay personal income tax on the dividends received from corporations.This is an example of
A)double taxation
B)continuous life
C)no mutual agency
D)a limited liability company
Answer: A
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Chapter 2: Recording Business Transactions
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Q1) The percentage of assets that are financed with liabilities can be calculated using the ________.
A)accounting equation
B)debt ratio
C)journal
D)ledger Answer: B
Q2) A business prepays four months' office rent.Which of the following accounts is debited?
A)Rent Expense
B)Cash
C)Prepaid Rent
D)Unearned Rent Answer: C
Q3) Which of the following is a liability account?
A)Accounts Payable
B)Prepaid Expense
C)Salaries Expense
D)Service Revenue Answer: A
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) Deferred revenues are assets because the business has collected the cash before earning the revenue.
A)True
B)False
Answer: False
Q2) The Family Dental Corporation prepays the rent on its dental office.On July 1,the corporation paid $18,000 for 6 months of rent.How much Rent Expense should Family Dental Corporation record the three months ended September 30 under the cash basis? Why?
Answer: Family Dental should report Rent Expense of $18,000 because expenses are recorded when cash is paid.
Q3) The sum of all the depreciation expense recorded to date for a depreciable asset is called ________.
A)book value
B)residual value
C)depreciation expense
D)accumulated depreciation
Answer: D
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Chapter 4: Completing the Accounting Cycle
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Q1) James Service Company earned revenues of $100,000 and incurred expenses of $107,000.Prepare the entry to close the Income Summary account.
Q2) A company has $120,000 in current assets; $600,000 in total assets; $90,000 in current liabilities,and $140,000 in total liabilities.Calculate the current ratio of the company.(Round your answer to two decimals. )
A)1.33
B)1.71
C)1.75
D)0.86
Q3) List the steps of the accounting cycle that take place at the end of the period.
Q4) A current ratio that has increased from the prior period indicates an improvement in the company's ability to pay its current debts.
A)True
B)False
Q5) The operating cycle is the process by which companies produce their financial statements for a specific period.
A)True
B)False
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Page 6
Chapter 5: Merchandising Operations
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Sample Questions
Q1) A company using the perpetual inventory system purchased inventory worth $20,000 on account with terms of 2/10,n/30.Defective inventory of $3,000 was returned two days later,and the accounts were appropriately adjusted.If the invoice is paid within 10 days,the amount of the purchase discount that would be available to the company is
A)$340
B)$460
C)$400
D)$390
Q2) Even in a perpetual inventory system that updates the inventory account as and when transactions occur,the business must count its inventory at least once in a year.
A)True
B)False
Q3) The key difference in the closing process under the periodic inventory system is how merchandise inventory is handled.
A)True
B)False
Q4) Provide journal entries to close the Income Summary account and the Dividends account.
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Chapter 6: Merchandise Inventory
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Q1) Which of the following is an application of conservatism?
A)reporting inventory at the lower of cost or market
B)reporting only material amounts in the financial statements
C)reporting all relevant information in the financial statements
D)using the same depreciation method from period to period
Q2) Which of the following inventory costing methods results in the highest value of ending inventory during a period of rising inventory costs?
A)specific identification
B)weighted-average
C)last-in,first-out
D)first-in,first-out
Q3) Which of the following inventory costing methods yields the highest net income during a period of rising inventory costs?
A)specific identification
B)weighted-average
C)last-in,first-out
D)first-in,first-out
Q4) List and briefly discuss three measures that can be taken to maintain good controls over merchandise inventory.
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Chapter 7: Internal Control and Cash
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Q1) Why is it necessary to journalize transactions from the bank reconciliation? List two examples of items that need to be journalized.
Q2) For good controls over cash payments,the person who orders goods from a supplier should always be different from the person who approves the payment.
A)True
B)False
Q3) Under the Sarbanes-Oxley Act,accounting firms are allowed to audit a public company and provide certain consulting services for the same client.
A)True
B)False
Q4) Which of the following is representative of safeguarding assets?
A)attaching electronic sensors to merchandise inventory
B)reducing expense to increase operating profit
C)increasing operating profit to increase net income
D)allowing company accountants to handle cash
Q5) Journalize the adjusting entry for the second reconciling item: Interest revenue.
Q6) Journalize the adjusting entry for the third reconciling item: NSF check.
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Page 9
Chapter 8: Receivables
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Q1) Accounts Receivable has a balance of $4,000,and the Allowance for Bad Debts has a credit balance of $400.The allowance method is used.What is the net realizable value of Accounts Receivable after a $160 account receivable is written off?
A)$3,440
B)$3,760
C)$3,600
D)$4,000
Q2) Niagara Art is a new business.During its first year of operations,credit sales were $41,000 and collections of credit sales were $37,000.One account,$700,was written off.Management uses the percent-of-sales method to account for bad debts expense and estimates 2% of credit sales to be uncollectible.Bad debts expense for the first year of operations is ________.
A)$120
B)$820
C)$700
D)$1,560
Q3) Prepare the journal entry to record an uncollectible account receivable of $10,000,using the direct write-off method.
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Chapter 9: Plant Assets, natural Resources, and Intangibles
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Sample Questions
Q1) Cardoza Corp.purchased a mine on January 1,2016,for $513,000,which is estimated to contain 30,000 tons of iron ore.There is no residual value.The business extracted and sold 9,500 tons of ore in 2016 and 16,800 tons of ore in 2017.What is the depletion expense for 2017?(Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar. )
A)$162,450
B)$449,730
C)$287,280
D)$63,270
Q2) Danube Corp.purchased a used machine for $17,000.The machine required installation costs of $7,000 and insurance while in transit of $600.At which of the following amounts would the be recorded? \(\text { machine }\)
A)$17,000
B)$24,000
C)$17,600
D)$24,600
Q3) A natural resource is an asset that comes from the earth and is consumed.
A)True
B)False
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Page 11
Chapter 10: Investments
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Sample Questions
Q1) Which of the following securities pay dividends?
A)corporate bonds
B)common stocks
C)debt securities
D)Treasury bills
Q2) Investment income may come from interest earned from debt investments,dividends earned from stock investments,and/or increases in the market value of the security.
A)True
B)False
Q3) Green Services,Inc.invests its excess cash in Creative Technologies,Inc.and acquires 6,000 shares for $61.75 per share.Green Services,Inc.owns less than 2% of Creative's voting stock and plans to hold the stock for two years.While preparing the journal entry to record this transaction,________.
A)Long-term Investments-Available-for-Sale is debited for $370,500
B)Long-term Investments-Held-to-Maturity is debited for $370,500
C)Long-term Investments-Trading Investments is credited for $370,500
D)Long-term Investments-Significant Interest Investments is debited for $370,500
Q4) List and discuss two common reasons why companies invest in debt or equity securities.
Page 12
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Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) On September 1,2017,Neighborhood,Inc.borrowed $125,000 by signing a nine-month,7.2% note payable.Prepare the journal entry to accrue interest expense on December 31,2016.
Q2) The employees of Royal Clothes achieved all of the sales goals for 2017.Royal decides to reward the employees with a bonus of 20% on annual net income,after deducting the bonus.The net income before the calculation of the bonus is $312,000.What is the amount of the bonus?
A)$62,400
B)$52,000
C)$55,059
D)$12,480
Q3) Timothy's gross pay for this month is $8,950.His gross year-to-date pay,prior to this month,totaled $112,000.What is the amount of FICA tax withheld from Timothy's pay for this month? (Assume an OASDI rate of 6.2%,applicable on the first $117,000 earnings,and a Medicare rate of 1.45%,applicable on all earnings. )
A)$310.00
B)$129.78
C)$439.78
D)$554.90
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Page 13
Chapter 12: Long-Term Liabilities
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Q1) The date on which the principal amount is repaid to the bondholder is known as the
A)issuing date
B)interest date
C)maturity date
D)installment date
Q2) On January 1,2017,Sullivan Cabinetry Company purchases $300,000 of property by paying $50,000 in cash and signing a 10-year mortgage note at 13% for the balance.Sullivan will make yearly payments of $46,072.Prepare the amortization schedule for the first five payments.(Round your answers to the nearest dollar. )
Q3) On April 1,2017,Nurix Manufacturers purchases equipment for $100,000,paying $30,000 in cash and signing a 10-year mortgage for $70,000 at 8% annual interest.Prepare the journal entry to record the acquisition of the equipment.
Q4) On July 1,2106,Jordan Equipment Dealer issued $600,000 of 9% bonds payable that mature in seven years.These bonds were issued at face value and pay interest each June 30 and December 31.Each semiannual interest payment is $27,000.
A)True
B)False
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Page 14
Chapter 13: Stockholders Equity
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Q1) Which of the following actions will increase the Common Stock account?
A)cash dividend
B)stock split
C)stock dividend declared and distributed
D)purchase of treasury stock
Q2) Paid-in capital consists of ________.
A)amounts received from customers
B)amounts raised by issuing bonds or preferred stocks
C)earnings generated by the corporation
D)amounts received from stockholders in exchange for stock
Q3) Which of the following is an advantage of the corporate form of business?
A)less degree of government regulation
B)limited liability of stockholders
C)separation of ownership and management
D)low start-up costs
Q4) Which of the following occurs when a 2-for-1 stock split is declared?
A)The balance in Common Stock remains the same.
B)The balance in Common Stock is reduced to half the original amount.
C)The balance in Common Stock doubles.
D)The balance in Paid-in Capital in Excess of Par-Common doubles.
Page 15
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Chapter 14: The Statement of Cash Flows
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Q1) A business's cash receipts and cash payments for a specific period are reported on a(n)________.
A)income statement
B)balance sheet
C)statement of cash flows
D)cash reconciliation statement
Q2) The activities that are included in the operating activities section of the statement of cash flows are ________.
A)activities that involve stockholders' equity
B)activities that create revenue or expenses
C)activities that increase or decrease long-term assets
D)activities that pertain to construction of new facilities
Q3) When preparing the statement of cash flows using the indirect method,a decrease in current liabilities is added to the net income to arrive at net cash flow from operating activities.
A)True
B)False
Q4) What does free cash flow represent? How is it used to evaluate business performance?
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Chapter 15: Financial Statement Analysis
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Q1) The financial statements for Myers Service Company include the following items: \(\begin{array}{lrr} & 2017 & 2016 \\
\text { Cash } & \$ 51,500 & \$ 49,000 \\
\text { Short-term Investments } & 27,000 & 13,500 \\
\text { Net Accounts Receivable } & 55,000 & 52,000 \\
\text { Merchandise Inventory } & 131,000 & 47,000 \\
\text { Total Assets } & 528,000 & 553,000 \\
\text { Accounts Payable } & 129,500 & 124,000 \\
\text { Salaries Payable } & 23,000 & 19,000 \\
\text { Long-term Note Payable } & 60,000 & 60,000
\end{array}\) Compute the acid-test ratio for 2016.(Round your answer to two decimal places) A)0.88
Q2) The disposal of a business segment is reported as discontinued operations. A)True B)False
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Chapter 16: Introduction to Managerial Accounting
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Q1) How does a manufacturing company calculate unit product cost? Why do managers need to know the unit product cost?
Q2) Houston Corporation reports the following cost information for March:
\[\begin{array} { | l | r | }
\hline \text { Cost of Goods Manufactured } & \$ 75,000 \\
\hline \text { Manufacturing Overhead } & 18,700 \\
\hline \text { Finished Goods Inventory, March 1 } & 4,000 \\
\hline \text { Finished Goods Inventory, March 31 } & 4,000 \\
\hline \text { Work-in-Process Inventory, March 1 } & 9,790 \\
\hline \text { Work-in-Process Inventory, March 31 } & 1,280 \\
\hline \text { Direct Labor } & 36,800 \\
\hline
\end{array}\] What is the amount of direct materials used by the company in March?
A)$10,990
B)$8,510
C)$18,100
D)$19,500
Q3) Define product cost.How does a merchandising company treat these costs?
Q4) Describe the flow of product costs for a manufacturer.
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Chapter 17: Job Order Costing
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Q1) Neptune Accounting Services expects its accountants to work for 24,000 direct labor hours per year.The company's estimated total indirect costs are $225,000.The direct labor rate is $70 per hour.The company uses direct labor hours as the allocation base for indirect costs.If Neptune performs a job requiring 30 hours of direct labor,what is the total job cost? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar. )
A)$225,000
B)$281
C)$2,381
D)$2,100
Q2) Which of the following is a reason why a job order costing system is appropriate for a custom furniture manufacturer?
A)The cost incurred for each job will differ as per the order specifications.
B)The direct costs incurred for each job are the same,only indirect costs vary.
C)The raw materials used have already been accounted for using process costing.
D)Custom furniture manufacturers produce large quantities of similar products.
Q3) Patrick Manufacturing Systems uses job order costing and a perpetual inventory system.When recording the sale of a job,which account(s)is(are)credited?
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Chapter 18: Process Costing
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Q1) Peterson Enterprises manufactures picture frames.Its production operations are divided into two departments - Assembly and Finishing.The company uses a process costing system.Peterson incurred the following costs during the year to produce 6,000 picture frames: \[\begin{array} { | l | r | }
\hline \text { Assembly } & \$ 9,700 \\
\hline \text { Finishing } & \$ 2,250 \\
\hline
\end{array}\] If Peterson can only sell 5,100 picture frames during the year,what will be the cost per unit of the picture frames produced? (Round your answer to the nearest cent. )
A)$2.34
B)$1.99
C)$1.62
D)$1.90
Q2) Provide the formula for (1)To account for and (2)Accounted for.
Q3) In a process costing system,a department's total production costs incurred in a particular period must equal the total costs transferred out of the department.
A)True
B)False
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Page 20
Chapter 19: Cost
Management Systems: Activity-Based, just-In-Time, and Quality Management Systems
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Q1) The first step in developing an activity-based costing system is to identify the activities that will be used to allocate the manufacturing overhead costs.
A)True
B)False
Q2) The main difference between activity-based costing and traditional costing systems is that activity-based costing uses a separate allocation base for each activity.
A)True
B)False
Q3) Alfeo Corporations has adopted a JIT management system and has the following transactions in February:
Feb 2 Incurred labor and overhead costs, $89,000
Feb 18 Completed 750 units with standard costs of \(\$ 93\) for direct materials and \(\$ 146\) for conversion costs Open a T-account for Conversion Costs.Post appropriate entries to determine the amount of underallocated or overallocated overhead.Record the adjusting entry.
Q4) List and briefly describe the four types of quality-related costs.
Q5) Managers can use activity-based management to make what two kinds of decisions?
Q6) Define target cost.How is target cost determined?
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Chapter 20: Cost-Volume-Profit Analysis
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Q1) Contribution margin is the amount that contributes to covering the fixed costs and then to providing operating income.
A)True
B)False
Q2) Becky's Bakery sells three large muffins for every two small ones.A small muffin sells for $3.50 with a variable cost of $2.00.A large muffin sells for $6.00 with a variable cost of $3.00.What is the weighted-average contribution margin? (Round any intermediate calculations and your final answer to the nearest cent. )
A)$4.75 per muffin
B)$2.25 per muffin
C)$4.50 per muffin
D)$2.40 per muffin
Q3) Higher fixed costs increase the total number of units required to break even.
A)True
B)False
Q4) Total fixed costs can change from one relevant range to another.
A)True
B)False
Q5) How is the contribution margin calculated?
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Chapter 21: Variable Costing
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Q1) Dean Computer Services provides services to corporate and individual customers.During the month of June,the corporate business segment provided services to 300 customers and earned $80,000 in revenue.The individual business segment provided services to 200 customers and earned $45,000 in revenue.The variable costs for the corporate and individual business segments amounted to $32,000 and $25,000,respectively.In addition,the fixed costs of the company amounted to $8,500.The contribution margin ratios of the corporate segment and individual segment are ________,respectively.(Round your answers two decimal places. )
A)106.67% and 25.00%
B)40.00% and 44.44%
C)40.00% and 55.56%
D)60.00% and 44.44%
Q2) For which of the following decisions is absorption costing most appropriate?
A)decisions related to using the sales mix to maximize profitability
B)decisions related to controlling short-term costs
C)decisions related to setting sales prices in the long run
D)decisions related to increasing contribution margin
Q3) When units produced is less than units sold,how does operating income differ between variable costing and absorption costing? Explain your answer.
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Chapter 22: Master Budgets
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Q1) Health Resources expects to sell 490 units of Product A and 420 units of Product B each day at an average price of $16 for Product A and $27 for Product B.The expected cost for Product A is 41% of its selling price and the expected cost for Product B is 63% of its selling price.Health Resources has no beginning inventory,but it wants to have a four-day supply of ending inventory for each product.Compute the company's budgeted sales for the next (seven-day)week.(Round the answer to the nearest dollar. )
A)$10,359
B)$76,720
C)$134,260
D)$19,180
Q2) When preparing the budgeted balance sheet,the balance of the Accounts Payable account is taken from the cash budget.
A)True
B)False
Q3) The production manager projects direct labor costs.
A)True
B)False
Q4) List the three sections of the cash budget.
Q5) What is a common method of accessing short-term financing?
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Chapter 23: Flexible Budgets and Standard Cost Systems
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Q1) Favorable variances are contra expenses and therefore decrease Cost of Goods Sold.
A)True
B)False
Q2) Define variance.What is the difference between a favorable and an unfavorable variance?
Q3) McGrath's produces and sells two types of t-shirts-Fancy and Plain.The company provides the following data: \[\begin{array} { l l l }
& \text { Budget } & \text { Actual } \\
\text { Unit sales price - Fancy } & \$ 24 & \$ 25 \\
\text { Unit sales price - Plain } & \$ 18 & \$ 17 \\
\text { Unit sales - Fancy } & 1,300 & 1,250 \\
\text { Unit sales - Plain } & 9 0 0&8 7 5
\end{array}\] Compute the flexible budget variance for Fancy t-shirts for sales revenue.
Q4) An unfavorable variance means more cost has been incurred than planned. A)True
B)False
Q5) What does the variable overhead cost variance measure?
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Chapter 24: Responsibility Accounting and Performance Evaluation
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Q1) For each of the following responsibility centers,state the typical focus of the responsibility report and briefly discuss the focus.
\[\begin{array} { | l | l | l | }
\hline { \begin{array} { c }
\text { Responsibility } \\
\text { Center }
\end{array} } & \begin{array} { c }
\text { Focus of the } \\
\text { Responsibility Report }
\end{array} & \text { Brief Discussion of the Focus } \\
\hline \text { Cost } & & \\
\hline \text { Revenue } & & \\
\hline \text { Profit } & & \\
\hline
\end{array}\]
Q2) Management by exception directs the management's attention to important differences between the actual and the budgeted amounts.
A)True
B)False
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Chapter 25: Short-Term Business Decisions
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Q1) Nelson Products is a price-setter that uses the cost-plus pricing approach.The products are specialty vacuum tubes used in sound equipment.The CEO is certain that the company can produce and sell 310,000 units per year,due to the high demand for the product.Variable costs are $2.40 per unit.Total fixed costs are $960,000 per year.The CEO will receive stock options if $200,000 of operating income for the year is reported.What sales price would allow the CEO to achieve the target if the cost-plus pricing method is used? (Round your answer to the nearest cent. )
A)$2.40 per unit
B)$6.14 per unit
C)$3.74 per unit
D)$4.85 per unit
Q2) Which of the following is always irrelevant to short-term operating decisions?
A)relevant cost
B)differential cost
C)opportunity cost
D)sunk cost
Q3) A customer of Mason Manufacturing has requested a one-time order at a reduced sales price.Before making the special pricing decision,what are three questions that management of Mason Manufacturing must consider?
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Chapter 26: Capital Investment Decisions
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Q1) Compound interest assumes that all interest earned will remain invested and earn additional interest at the same interest rate.
A)True
B)False
Q2) The payback method is used only when the net cash inflows from a capital investment are the same for each period.
A)True
B)False
Q3) Under what circumstances is the investment with the shortest payback the best choice? How should managers use the payback method?
Q4) List the steps of the capital budgeting process and identify actions that relate to each step.
Q5) If the expected accounting rate of return meets or exceeds the required rate of return,the decision rule is to not make the investment.
A)True
B)False
Q6) What are the strengths of the net present value capital budgeting method?
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Page 28
Chapter 27: Accounting Information Systems
Available Study Resources on Quizplus for this Chatper
143 Verified Questions
143 Flashcards
Source URL: https://quizplus.com/quiz/70781
Sample Questions
Q1) In an accounting information system,outputs are the reports used for decision making,which include the financial statements.
A)True
B)False
Q2) An accounting information system is said to be relevant,if it ________.
A)works smoothly with the business's employees and organizational structure
B)safeguards a business's assets and reduces the likelihood of fraud and errors
C)provides information that will improve decision making and reduce uncertainty
D)accommodates changes in the business over time
Q3) Which of the following transactions is recorded by selecting the "Receive payment" action of QuickBooks?
A)making electricity bill payments
B)selling merchandise inventory on account
C)selling products for cash
D)paying interest to bondholders
Q4) Which of the following is an entry-level accounting software package?
A)Microsoft Word
B)QuickBooks
C)Cloud Computing
D)Oracle®
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