Business Accounting
Midterm Exam
Course Introduction
Business Accounting introduces students to the fundamental concepts and principles of accounting as they apply to business organizations. The course covers key topics such as the accounting cycle, preparation and analysis of financial statements, recording of business transactions, and the role of accounting in decision-making processes. Students will learn how to use accounting information to assess an organization's financial position, performance, and cash flow, enabling more informed business decisions. Emphasis is placed on practical application, ethical considerations, and the use of accounting software to simulate real-world scenarios.
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 Verified Questions
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Sample Questions
Q1) Santa Fe Company was started on January 1,Year 1,when it acquired $9,000 cash by issuing common stock.During Year 1,the company earned cash revenues of $4,500,paid cash expenses of $3,750,and paid a cash dividend of $250.Which of the following is true based on this information?
A) The December 31, Year 1 balance sheet would show total equity of $8,750.
B) The Year 1 income statement would show net income of $500.
C) The Year 1 statement of cash flows would show net cash inflow from operating activities of $4,500.
D) The Year 1 statement of cash flows would show a net cash inflow from financing activities of $8,750.
Answer: D
Q2) Which of the following statements is false regarding managerial accounting information?
A) It is often used by investors.
B) It is more detailed than financial accounting information.
C) It can include nonfinancial information.
D) It focuses on divisional rather than overall profitability.
Answer: A
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Page 3
Chapter 2: Accounting for Accruals
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78 Verified Questions
78 Flashcards
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Sample Questions
Q1) A payment to an employee in settlement of salaries payable decreases an asset and decreases equity.
A)True
B)False
Answer: False
Q2) Revenue on account amounted to $5,000.Cash collections of accounts receivable amounted to $2,300.Expenses for the period were $2,100.The company paid dividends of $450.What was net income for the period?
A) $1,200
B) $2,900
C) $2,850
D) $2,450
Answer: B
Q3) Certified public accountants are obligated to act in a way that serves the public interest.
A)True
B)False
Answer: True
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4
Chapter 3: Accounting for Deferrals
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87 Flashcards
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Sample Questions
Q1) Tammy Company paid cash to purchase a long-term operational asset.The cost of the asset will be expensed (depreciated)
A) on the day it is purchased.
B) at the end of its useful life.
C) over the useful life of the asset.
D) when the asset is sold.
Answer: C
Q2) The financial statement ratio that may be of greatest interest to a company's stockholders is the amount of its return-on-assets ratio.
A)True
B)False
Answer: False
Q3) An adjusting entry that decreases unearned revenue and increases service revenue is a claims exchange transaction.
A)True
B)False
Answer: True
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Chapter 4: Accounting for Merchandising Businesses
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104 Verified Questions
104 Flashcards
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Sample Questions
Q1) Which of the following statements regarding a multistep income statement is true?
A) When a company sells inventory for more than its cost, the difference between the sales revenue and the cost of goods sold is called the operating income.
B) A single-step income statement shows sales, gross margin, and net income.
C) Gross margin is calculated as sales revenue minus cost of goods sold.
D) Gross margin equals net income.
Q2) Common size financial statements are prepared by converting dollar amounts to percentages.
A)True
B)False
Q3) A company that purchases merchandise treats a cash discount as a reduction to the cost of merchandise inventory.
A)True
B)False
Q4) With a periodic inventory system,the cost of goods sold is recorded at the time of a sale of merchandise.
A)True
B)False
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6
Chapter 5: Accounting for Inventories
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84 Flashcards
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Sample Questions
Q1) What happens when a company is operating in an inflationary environment?
A) The company's net income will be higher if it uses LIFO than if it uses FIFO.
B) The company's cost of goods sold will be lower if it uses LIFO as opposed to FIFO.
C) The company's net income will be the same regardless of whether LIFO or FIFO is used.
D) The company's assets will be lower if it uses LIFO as opposed to FIFO cost flow.
Q2) The Internal Revenue Service allows a company to use LIFO for income tax purposes only if it also uses LIFO for financial reporting.
A)True B)False
Q3) A company uses a cost flow method (such as LIFO or FIFO)to allocate product costs between cost of goods sold and beginning inventory. A)True B)False
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Chapter 6: Internal Control and Accounting for Cash
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Sample Questions
Q1) How are cash overages reported on the financial statements?
A) Petty Cash Payable
B) Petty Cash Receivable
C) Petty Cash Expense
D) Miscellaneous revenue
Q2) Which of the following is an internal control procedure used to safeguard a company's assets?
A) Depositing cash receipts in a bank on a timely basis
B) Segregation of duties
C) Preparing a bank reconciliation
D) All of these answer choices are correct
Q3) Which internal control procedure is a deterrent to corruption?
A) Segregation of duties
B) Physical controls
C) Fidelity bonding
D) Use of prenumbered documents
Q4) Establishment of a petty cash fund is an asset exchange transaction.
A)True
B)False
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Chapter 7: Accounting for Receivables
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Sample Questions
Q1) Which accounting concept can be used by some companies to justify the use of the direct write-off method?
A) The entity concept
B) The materiality concept
C) The going concern concept
D) The monetary principle
Q2) The adjustment to recognize uncollectible accounts expense does not affect the net realizable value of receivables.
A)True
B)False
Q3) The net realizable value of accounts receivable is the amount of receivables a company expects to collect.
A)True
B)False
Q4) When a company receives payment from a customer whose account was previously written off,the account is reinstated and the net realizable value of Accounts Receivable increases.
A)True
B)False
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Chapter 8: Accounting for Long-Term Operational Assets
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Sample Questions
Q1) 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
Q2) Late in a plant asset's useful life,the amount of depreciation that would be recorded with the double-declining-balance method is less than the amount that would be recognized with the straight-line method.
A)True
B)False
Q3) Which of the following would be classified as a tangible asset?
A) Land
B) Goodwill
C) Copyright
D) Trademark
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Chapter 9: Accounting for Current Liabilities and Payroll
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Sample Questions
Q1) Which of the following is a claims exchange transaction?
A) Accrual of interest on a note payable
B) Issued a note to purchase equipment
C) Repaid principal on a note payable
D) Paid interest on a note payable
Q2) Vogel Company purchased $8,000 of equipment by making a $500 down payment and issuing a note for the remainder.As a result of this event,assets increased by $8,000.
A)True
B)False
Q3) A warranty obligation only occurs if a buyer purchases an extended warranty. A)True
B)False
Q4) If a company is in a region in which floods or earthquakes are deemed to be possible,the company should record a contingent liability. A)True B)False
Q5) When a warranty claim is settled,the seller's equity decreases. A)True B)False
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Chapter 10: Accounting for Long-Term Debt
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Sample Questions
Q1) On January 1,Year 1,Williams Corporation issued $200,000 of callable bonds at face value.The bonds carried a 2% call premium.If Williams calls the bonds,how would this event affect the company's accounting equation?
A) Decrease stockholders' equity by $4,000.
B) Decrease liabilities by $200,000.
C) Decrease assets by $204,000.
D) All of these answer choices are correct.
Q2) Amortization of a discount on bonds payable is an asset use transaction.
A)True B)False
Q3) What is the amount of principal repayment included in the payment made on December 31,Year 1?
A) $25,920
B) $81,150
C) $74,658
D) $55,230
Q4) 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) Powell Corporation had $10 par stock with a market price of $60,when it declared a 2-for-1 stock split.After the stock split,the number of shares outstanding will double,and the market price of the stock should drop to about $30.
A)True
B)False
Q2) A purchase of treasury stock is an asset use transaction.
A)True
B)False
Q3) The earnings of sole proprietorships are taxable to the owners rather than the company itself.
A)True
B)False
Q4) Flagler Corporation shows a total of $660,000 in its Common Stock account and $1,600,000 in its Paid-in Capital Excess account.The par value of Flagler's common stock is $8.How many shares of Flagler stock have been issued?
A) 117,500
B) 200,000
C) 82,500
D) The number of shares cannot be determined using the information provided.
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Chapter 12: Statement of Cash Flows
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Sample Questions
Q1) Under the indirect method,which of the following items would be added to net income to determine the cash flow from operating activities?
A) Gain on the sale of equipment
B) Depreciation expense
C) Accrued interest receivable
D) Decrease in the balance of accounts payable
Q2) The FASB requires that companies report cash flow per share in their audited financial statements.
A)True
B)False
Q3) How is the cash paid to purchase land reported in the statement of cash flows?
A) Cash outflow from financing activities
B) Schedule of noncash investing and financing activities
C) Cash outflow from investing activities
D) Cash inflow from operating activities
Q4) Which of the following transactions affects cash flows?
A) Accrual of interest receivable
B) Issuance of a stock dividend
C) Recognition of depreciation expense
D) Payment of dividends declared in a previous year
14
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Chapter 13: The Double-Entry Accounting System
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Sample Questions
Q1) What is the after-closing amount of retained earnings that will be reported on Packard's balance sheet at the end of Year 2? (Assume that closing entries have been made).
A) $640
B) $800
C) $290
D) $740
Q2) The entry to record revenue earned on account includes a debit to accounts receivable and a credit to revenue.
A)True
B)False
Q3) What is the term used to describe the right side of a T-account?
A) Credit Side
B) Claims Side
C) Debit Side
D) Equity Side
Q4) The year for which companies prepare their financial statements is their fiscal year.
A)True
B)False
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Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Working capital is defined as:
A) Current assets divided by current liabilities.
B) Total assets minus total liabilities.
C) Current assets less current liabilities.
D) Current liabilities divided by total liabilities.
Q2) Benson Company declared and paid a cash dividend totaling $500,000 on its common stock.As a result of this transaction,the company's debt to assets ratio will:
A) Decrease.
B) Increase.
C) Remain the same.
D) Cannot be determined.
Q3) Which of the following is a potential limitation of financial statement analysis?
A) Lack of comparability of firms in different industries
B) The impact of changing economic conditions
C) The impact of having more than one acceptable alternative accounting principle for accounting for a given transaction or economic event
D) All of these answers are correct.
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