Business Accounting
Final Test Solutions
Course Introduction
Business Accounting provides an introduction to the fundamental principles and practices of accounting within a business context. The course covers topics such as financial statement preparation, recording and analyzing business transactions, understanding the accounting cycle, and interpreting key financial reports. Students will learn how to use accounting information for effective decision-making, budgeting, and performance evaluation in various organizational settings. Emphasis is also placed on ethical considerations and the regulatory framework guiding accounting practices. This course lays a foundation for further study in accounting and finance by equipping students with essential skills for analyzing and communicating financial information.
Recommended Textbook
Financial Accounting 9th Edition by Walter
T. Harrison
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13 Chapters
2240 Verified Questions
2240 Flashcards
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Page 2
Chapter 1: The Financial Statements
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) When looking at the current assets section of a company's balance sheet:
A) cash equivalents are considered short-term investments.
B) short-term investments include stocks and bonds of other companies that the company intends to sell within the next year.
C) merchandise inventory is considered a prepaid expense.
D) accounts payable are amounts the company expects to collect from customers within the next year.
Answer: B
Q2) When analyzing a company's income statement, a fact to remember is that:
A) cost of sales is another term for gross profit.
B) cost of goods sold is the major expense of merchandising entities.
C) companies are not allowed to offset items such as interest income and interest expense against each other.
D) net sales is equal to sales revenue less cost of goods sold.
Answer: B
Q3) Owners' equity is called stockholders' equity for a corporation.
A)True
B)False
Answer: True
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Chapter 2: Transaction Analysis
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Sample Questions
Q1) Muddle Company performs a service for one of its customers and immediately collects the cash. This transaction will:
A) have no effect on liabilities.
B) decrease net income.
C) decrease Retained Earnings.
D) increase Accounts Receivable.
Answer: A
Q2) Accounting transactions are initially recorded in the:
A) T-account.
B) ledger.
C) journal.
D) financial statements.
Answer: C
Q3) The account is the basic summary device of accounting.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Accrual Accounting Income
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Sample Questions
Q1) The book value of a plant asset is equal to its cost plus any improvements made to the asset.
A)True
B)False
Answer: False
Q2) Accounts Receivable and Common Stock are accounts that need to be adjusted at the end of the period.
A)True
B)False Answer: False
Q3) The expense recognition principle recognizes expenses in the same period in which any related revenues are earned.
A)True
B)False Answer: True
Q4) In the retail industry, income is recognized under IFRS when the cash is received.
A)True
B)False Answer: False
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Chapter 4: Internal Control Cash
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173 Flashcards
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Sample Questions
Q1) When approving an invoice for payment:
A) the receiving department should examine the payment packet to make sure all the documents agree.
B) after payment, the payment packet should be stamped "paid".
C) checks should be returned to the department who prepared them for mailing.
D) the person who ordered the goods should examine the payment package to make sure all the documents agree.
Q2) Interest paid on a company's checking account should appear on the bank reconciliation as:
A) added to the bank balance.
B) added to the book balance.
C) deducted from the book balance.
D) having no impact on the book balance.
Q3) Which is NOT an objective of an internal control system?
A) Safeguarding of assets
B) Compliance with company policies
C) Compliance with legal requirements
D) Risk minimization
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6
Chapter 5: Short-Term Investments Receivables
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201 Verified Questions
201 Flashcards
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Sample Questions
Q1) Under the allowance method, when a company determines that they will not be able to collect from a particular customer, they will debit:
A) Uncollectible-Account Expense.
B) Accounts Receivable.
C) Allowance for Uncollectible Accounts.
D) Sales Revenue.
Q2) The quick ratio helps to measure a company's liquidity.
A)True
B)False
Q3) Estimating uncollectible accounts by analyzing individual accounts receivable according to the length of time they have been outstanding is known as the:
A) aging-of-receivables method.
B) percent-of-sales method.
C) allowance method.
D) direct write-off method.
Q4) Selling on credit creates both a benefit and a cost.
A)True
B)False
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Chapter 6: Inventory Cost of Goods Sold
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187 Flashcards
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Sample Questions
Q1) Under a perpetual inventory system, when a sale is made, the company:
A) makes a journal entry to record the sale only.
B) makes a journal entry to record only the cost of goods sold.
C) makes a journal entry to record the sale and the cost of goods sold.
D) does not need to make a journal entry.
Q2) The gross profit rate is calculated as:
A) cost of goods sold divided by net sales revenue.
B) net sales revenue minus gross profit on sales.
C) net sales revenue minus cost of goods sold.
D) gross profit divided by net sales revenue.
Q3) Beginning inventory and ending inventory have opposite effects on cost of goods sold.
A)True B)False
Q4) When applying the lower-of-cost-or-market rules to inventory valuation, market value generally refers to the cost at which the company can sell a unit of inventory.
A)True
B)False
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Chapter 7: Plant Assets, Natural Resources, Intangibles
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Sample Questions
Q1) An asset with no physical form, but that has special rights to current and expected future benefits is a(n):
A) intangible asset.
B) natural resource.
C) plant asset.
D) fixed asset.
Q2) Changes in accounting estimates are not allowed under the consistency principle.
A)True
B)False
Q3) The computation of depletion expense is most closely related to which method for computing depreciation?
A) Straight-line
B) Units-of-production
C) Double-declining balance
D) Modified accelerated cost recovery system.
Q4) In the units-of production method, a fixed amount of depreciation is assigned to each unit of output.
A)True
B)False
Q5) Determine the cost of the dump truck, based upon the following data:
Page 9
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Chapter 8: Long-Term Investments the Time Value of Money
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Sample Questions
Q1) An increase in foreign currency value relative to the U.S. dollar between the date of purchase and date of payment will create an exchange gain.
A)True
B)False
Q2) On January 1, 2012, Plymouth Company purchases $100,000, 6% bonds at a price of 90.4 and a maturity date of January 1, 2016. Interest is paid semiannually, on January 1 and July 1. Plymouth Company has a calendar year end. The entry to record the purchase of the bond investment on January 1, 2012, would include a:
A) debit to Short-Term Investment in Bonds for $100,000.
B) debit to Short-Term Investment in Bonds for$ 90,400.
C) debit to Long-Term Investment in Bonds for $100,000.
D) debit to Long-Term Investment in Bonds for$ 90,400.
Q3) The present value of $100,000 to be received in 5 years will be smaller if the discount rate is:
A) increased.
B) decreased.
C) not changed.
D) equal to the stated rate of interest.
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Chapter 9: Liabilities
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Sample Questions
Q1) The total interest expense over the life of a bond is:
A) the sum of the interest payments plus the total discount.
B) the sum of the interest payments plus the total premium.
C) the sum of the interest payments less the total discount.
D) the sum of the interest payments.
Q2) A contingency that is remote:
A) should be disclosed in the financial statements.
B) does not need to be disclosed.
C) must be accrued as a loss.
D) is recorded as a contingent liability.
Q3) Contingent liabilities are reported on the balance sheet.
A)True
B)False
Q4) A lower times-interest-earned ratio indicates the ease in a company's ability to pay interest expense
A)True B)False
Q5) The future value is always more than the present value. A)True
B)False
11
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) The date when a cash dividend becomes a legal obligation is on the:
A) date of record.
B) declaration date.
C) last day of the corporate year.
D) payment date.
Q2) Flanders, Inc. has 20,000 shares of preferred stock outstanding, with annual dividends paid at a rate of $2 per share. Flanders also has 40,000 shares of common stock outstanding. If Flanders, Inc. declares a $200,000 dividend, each outstanding share of common stock would receive:
A) $2.00.
B) $4.00.
C) $3.33.
D) $5.00.
Q3) Stockholders' equity is divided into:
A) retained earnings and paid-in capital.
B) retained earnings and common stock.
C) assets and liabilities.
D) common stock and preferred stock.
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12
Chapter 11: The Income Statement, the Statement of
Comprehensive Income, the Statement of Stockholders Equity
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Sample Questions
Q1) The net of foreign-currency transaction gains and losses will appear on the balance sheet.
A)True
B)False
Q2) The statement of management's responsibility, issued along with a company's financial statements, indicates all of the following EXCEPT that management: A) is responsible for establishing and maintaining an adequate system of internal control.
B) conducted an assessment of internal control over financial reporting based on the framework established by COSO.
C) states that the internal controls of the company have been audited by the company's outside auditors.
D) has hired a new CEO in the current year.
Q3) Income tax payable appears on the: A) tax return.
B) statement of stockholders' equity.
C) income statement.
D) balance sheet.
Page 13
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Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) Salem, Inc. uses the indirect method to prepare its statement of cash flows. Salem's Accumulated Depreciation-Trucks account increased during the period. Salem did not purchase or sell equipment during the period. The increase in Accumulated Depreciation-Trucks is:
A) subtracted from net income to determine net cash provided by operating activities.
B) added to net income to determine net cash provided by operating activities.
C) shown as a cash outflow on the investing activities section.
D) shown as a cash outflow on the financing activities section.
Q2) Which of the following would be reported on a statement of cash flows as a financing activity?
A) Sale of equipment
B) Amortization expense
C) Collection of notes receivable
D) Purchase of treasury stock
Q3) A statement of cash flows:
A) may be combined with the income statement at the option of management.
B) is typically prepared at the request of major creditors.
C) is a basic financial statement required for publicly-held companies.
D) may be combined with the balance sheet.
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Page 14
Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) On a statement of cash flows, repayment of long-term debt is considered:
A) an operating activity.
B) an investing activity.
C) a financing activity.
D) a change in operating assets and liabilities.
Q2) The percentage change in any individual item shown on comparative financial statements is calculated by dividing the dollar amount of the change from the base period to the current period by:
A) the amount shown for the current period.
B) the base-period amount.
C) the average of the amounts shown for the base and the current periods.
D) the amount estimated for the future period.
Q3) In performing a vertical analysis, the base for cash is:
A) total liabilities and stockholders' equity.
B) total assets.
C) total cash and cash equivalents.
D) total current assets.
Q4) A ratio can be expressed as a proportion, a rate, or a percent.
A)True
B)False
Page 15
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