Business Accounting I Review
Questions
Course Introduction
Business Accounting I introduces students to the fundamental concepts and principles of financial accounting. The course covers the accounting cycle, including the identification, recording, and reporting of business transactions using generally accepted accounting principles (GAAP). Students learn how to prepare basic financial statements such as the balance sheet, income statement, and cash flow statement, and gain an understanding of the role of accounting in decision-making for both internal and external stakeholders. Emphasis is placed on analyzing and interpreting financial data to assess the financial health and performance of an organization.
Recommended Textbook
Introductory Financial Accounting for Business 1st Edition by Thomas Edmonds
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14 Chapters
1326 Verified Questions
1326 Flashcards
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Page 2
Chapter 1: An Introduction to Accounting
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99 Flashcards
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Sample Questions
Q1) Turner Company reported assets of $20,000 (including cash of $9,000),liabilities of $8,000,common stock of $7,000,and retained earnings of $5,000.Based on this information,what can be concluded?
A) 25% of Turner's assets are the result of prior earnings.
B) $5,000 is the maximum dividend that can be paid to shareholders.
C) 40% of Turner's assets are the result of borrowing from creditors.
D) 25% of Turner's assets are from prior earnings, $5,000 is the maximum possible dividend, and 40% of assets are the result of borrowed resources.
Answer: D
Q2) On January 1,Year 2,Chavez Company had beginning balances as follows: total assets of $12,500,total liabilities of $4,500,and common stock of $3,000.During Year 2,Chavez paid dividends to its stockholders of $2,000.Given that retained earnings amounted to $6,000 at the end of Year 2,what was Chavez's net income for Year 2?
A) $3,000
B) $5,000
C) $7,000
D) $2,000
Answer: A
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Page 3
Chapter 2: Accounting for Accruals
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Sample Questions
Q1) Mize Company provided $45,500 of services on account,and collected $38,000 from customers during the year.The company also incurred $37,000 of expenses on account,and paid $32,400 against its payables.How do these events impact the elements of the horizontal financial statements model?
A) Total assets would increase.
B) Total liabilities would increase.
C) Total equity would increase.
D) All of these answer choices are correct.
Answer: D
Q2) Accrued interest expense is an asset use transaction.
A)True
B)False
Answer: False
Q3) The primary difference between notes payable and accounts payable is that notes payable generally have longer terms and usually require interest charges.
A)True
B)False
Answer: True
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Chapter 3: Accounting for Deferrals
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Sample Questions
Q1) The entry to recognize depreciation expense incurred on equipment involves which of the following?
A) A decrease in assets
B) An increase in liabilities
C) An increase in assets
D) A decrease in liabilities
Answer: A
Q2) On January 1,Year 1,Melon Moving Company paid $55,000 to purchase a truck.The truck was expected to have a four-year useful life and a $5,000 salvage value.If Melon uses the straight-line method,the amount of book value shown on the Year 2 balance sheet is
A) $42,500
B) $30,000
C) $25,000
D) $12,500
Answer: B
Q3) Purchasing supplies for cash is an asset exchange transaction.
A)True
B)False
Answer: True
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Chapter 4: Accounting for Merchandising Businesses
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104 Flashcards
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Sample Questions
Q1) What happens when merchandise is delivered FOB Destination?
A) The seller pays the freight cost.
B) The seller records transportation-out expense.
C) The buyer pays the freight cost.
D) The seller pays the freight cost and records an expense.
Q2) JJ Co.purchased on account merchandise with a list price of $10,000.Payment terms were 1/15,n/45.If collection occurs before the discount expires,what is the effect of the sales discount on the balance sheet?
A) Decreases accounts receivable
B) Decreases inventory
C) Increases accounts payable
D) Increases cash
Q3) The beginning inventory plus cost of goods sold equals the cost of goods available for sale during the period.
A)True
B)False
Q4) Sales discounts do not affect a company's gross margin percentage.
A)True
B)False
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Chapter 5: Accounting for Inventories
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Sample Questions
Q1) Koontz Company uses the perpetual inventory method and the weighted-average method.On January 1,Year 1,the company's first day of operations,Koontz purchased 400 units of inventory that cost $7.50 each.On January 10,Year 1,the company purchased an additional 600 units of inventory that cost $9.00 each.If the company sells 550 units of inventory,what is the amount of inventory that would appear on the balance sheet immediately following the sale?
A) $3,780
B) $4,738
C) $3,080
D) $3,713
Q2) During a period of rising inventory prices the LIFO cost flow method will result in higher total assets than FIFO.
A)True
B)False
Q3) What is Glasgow's ending inventory under weighted-average (rounded)?
A) $2,361
B) $2,340
C) $1,980
D) $1,998
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Page 7
Chapter 6: Internal Control and Accounting for Cash
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Sample Questions
Q1) Requiring segregation of duties in a business eliminates the need for the work of one employee to serve as a check on the work of other employees.
A)True
B)False
Q2) Which of the following statements is true with regards to financial statement audits?
A) The auditors guarantee that the financial statements are accurate and correct.
B) Financial audits are directed toward the discovery of fraud.
C) Auditors provide reasonable assurance that statements are free from material misstatements, whether caused by errors or fraud.
D) Auditors will not disclose information that they have acquired as a result of their accountant-client relationship.
Q3) A well-designed system of internal controls will eliminate all fraud.
A)True B)False
Q4) The primary focus of financial statement audits is the discovery of fraud. A)True
B)False
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8
Chapter 7: Accounting for Receivables
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Sample Questions
Q1) The longer it takes to collect accounts receivable,the greater the implicit interest cost that is incurred.
A)True
B)False
Q2) The direct write-off method overstates assets on the balance sheet.
A)True
B)False
Q3) Many businesses find it more efficient to offer credit directly to customers rather than to accept third-party credit cards.
A)True
B)False
Q4) What is the amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows?
A) $97,000
B) $104,000
C) $89,520
D) $95,060
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Chapter 8: Accounting for Long-Term Operational Assets
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Sample Questions
Q1) Which of the following terms is used to describe the process of expense recognition for property,plant and equipment?
A) Amortization
B) Depreciation
C) Depletion
D) Revision
Q2) Z Company purchased an asset for $24,000 on January 1,Year 1.The asset was expected to have a four-year life and a $4,000 salvage value.What is the amount of depreciation expense for Year 1 using the double-declining-balance method?
A) $2,000
B) $3,000
C) $6,000
D) $12,000
Q3) Which of the following would not be classified as a tangible long-term asset?
A) Delivery truck
B) Timber reserve
C) Land
D) Copyright
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10
Chapter 9: Accounting for Current Liabilities and Payroll
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Sample Questions
Q1) Houston Co.borrowed $20,000 from Dallas Co.on March 1,Year 1.Houston issued a note payable that had a one-year term and the annual interest rate is 8%.How will the necessary adjustment,dated December 31,Year 1,affect the elements of the Year 1 financial statements?
A) Increase liabilities and increase expenses
B) Increase assets and increase revenues
C) Increase assets and increase liabilities
D) No effect
Q2) On September 1,Year 1,West Company borrowed $10,000 from Valley Bank.West agreed to pay interest annually at the rate of 6% per year.The note issued by West carried an 18-month term.West Company has a calendar year-end.What is the amount of interest expense that will be reported on West's income statement for Year 1?
A) $-0-
B) $150
C) $60
D) $200
Q3) When a warranty claim is settled,the seller's liabilities increase.
A)True
B)False
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Page 11
Chapter 10: Accounting for Long-Term Debt
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Sample Questions
Q1) Which of the following statements is true if Wayne issued the bonds for 96?
A) The market rate of interest was equal to the stated rate of interest.
B) The market rate of interest was lower than the stated rate of interest.
C) The market rate of interest was higher than the stated interest rate.
D) The bonds carried a variable or floating rate that changed in response to market conditions.
Q2) Which of the following correctly describes an installment note?
A) An installment note requires equal interest payments with the entire principal balance paid at maturity.
B) An installment note requires equal payments of interest and principal in which the amount of interest decreases over the life of the note.
C) An installment note requires equal payments of interest and principal in which the amount of interest increases over the life of the note.
D) The installment note requires decreasing payments of interest and principal in which the amount of interest remains constant over the life of the note.
Q3) Serial bonds are issued based on the overall strength of the borrower's credit.
A)True
B)False
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Chapter 11: Proprietorships, partnerships, and Corporations
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Sample Questions
Q1) All corporations are subject to extensive government regulation.
A)True
B)False
Q2) Which of the following statements about par value is true?
A) Par value dictates the initial price of the stock.
B) Par value may be revised each time a company issues more shares of stock.
C) Par value is generally greater than market value.
D) Par value has little connection to the market value of the stock.
Q3) A partner is responsible for his/her own actions,but not for actions taken by another partner on behalf of the partnership.
A)True
B)False
Q4) In a closely held corporation,exchanges of stock are limited to transactions between individuals.
A)True
B)False
Q5) Personal liability is a significant disadvantage of the partnership form of business organization.
A)True
B)False
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Chapter 12: Statement of Cash Flows
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Sample Questions
Q1) Grace Company sold equipment for $40,000 cash.The equipment has cost $70,000 and had accumulated depreciation of $44,000 at the time of the sale.Based on this information alone,which of the following statements is true?
A) Cash flow from investing activities would be less if the sale of equipment is reported on the statement of cash flows under the direct method than if it is reported under the indirect method.
B) Cash flow from investing activities would be greater if the sale of equipment is reported on the statement of cash flows under the direct method than if it is reported under the indirect method.
C) Cash flow from investing activities would be the same regardless of whether the sale of equipment is reported on the statement of cash flows under the direct method or the indirect method.
D) The answer cannot be determined because the amount of the salvage value is unknown.
Q2) Cash flow from operating activities is often less stable from year to year than the amount of net income reported on the income statement.
A)True
B)False
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Page 14
Chapter 13: The Double-Entry Accounting System
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Sample Questions
Q1) A trial balance can only be prepared at the end of the fiscal year,as part of the adjusting and closing processes.
A)True
B)False
Q2) Which of the following statements is true regarding a trial balance that balances?
A) All transactions have been properly recorded.
B) There are no missing transactions.
C) This equality can only be achieved after closing entries have been recorded and posted to the ledger accounts.
D) The equality of debits and credits has been proven.
Q3) The T-account format is also called the chart of accounts.
A)True
B)False
Q4) A company's adjusted trial balance provides the information needed to prepare the balance sheet and income statement.
A)True
B)False
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15
Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Bernard Company provided the following information from its financial records: \(\begin{array}{lllr}
\text { Net income } & \$ 250,000 & \text { Total stockholders' equity } & \$ 1,000,000 \\
\text { Common dividends } & \$ 15,000& \begin{array}{l}
\text { Common shares outstanding, } \\ 12 / 31
\end{array} & 150,000 \\
\text { Preferred rights } & \$ 175,000 & & \end{array}\)
What is the company's book value per share?
A) $0.50
B) $5.50
C) $6.67
D) $1.67
Q2) The accounts receivable turnover ratio can be used to assess a firm's solvency.
A)True
B)False
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