Business Accounting
Mock Exam
Course Introduction
Business Accounting is an essential course that introduces students to the foundational principles and practices of accounting within a business context. The course covers core topics such as the accounting cycle, preparation of financial statements, bookkeeping, and the interpretation of financial information. Students will learn how to analyze and record business transactions, manage accounts, and understand the regulatory frameworks that govern financial reporting. Emphasis is placed on the practical application of accounting concepts for decision-making, budgeting, and evaluating organizational performance, equipping students with the skills necessary for effective financial management in various business environments.
Recommended Textbook
Fundamental Accounting Principles 23rd Edition by John Wild
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Page 2
Chapter 1: Accounting in Business
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Q1) ________ users of accounting information are not directly involved in running the organization.
Answer: External
Q2) If a company purchases equipment costing $4,500 on credit, the effect on the accounting equation would be:
A) Assets increase $4,500 and liabilities decrease $4,500.
B) Assets increase $4,500 and liabilities increase $4,500.
C) Equity decreases $4,500 and liabilities increase $4,500.
D) Equity increases $4,500 and liabilities decrease $4,500.
E) Liabilities decrease $4,500 and assets increase $4,500.
Answer: B
Q3) ________ are the increases in equity from a company's sales of products and services to customers.
Answer: Revenues
Q4) Generally accepted accounting principles are the basic assumptions, concepts, and guidelines for preparing financial statements.
A)True
B)False Answer: True
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Chapter 2: Analyzing and Recording Transactions
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Q1) Posting is the transfer of journal entry information to the ledger.
A)True
B)False
Answer: True
Q2) At the end of its first month of operations, Michael's Consulting Services reported net income of $25,000. They also had account balances of: Cash, $18,000; Office Supplies, $2,000 and Accounts Receivable $10,000. The owner's total investment for this first month was $5,000. There were no owner withdrawals in the first month.
Calculate the ending balance in the Owner's Capital account to be reported on the Statement of Owner's Equity.
A) $20,000
B) $7,000
C) $30,000
D) $5,000
E) $25,000
Answer: C
Q3) You decrease the Accounts Payable account on the ________ side of its account.
Answer: left or debit
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Chapter 3: Adjusting Accounts and Preparing Financial Statements
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Q1) If accrued salaries were recorded on December 31 with a debit to Salaries Expense and a credit to Salaries Payable, and no reversing entries were made on January 1, the entry to record payment of these wages on the following January 5 would include:
A) A debit to Cash and a credit to Salaries Payable.
B) A debit to Cash and a credit to Prepaid Salaries.
C) A debit to Salaries Payable and a credit to Salaries Expense.
D) A debit to Salaries Payable and a credit to Cash.
E) No entry would be necessary on January 5.
Answer: D
Q2) Accrued expenses reflect transactions where cash is paid before a related expense is recognized.
A)True
B)False
Answer: False
Q3) ________ revenues are liabilities requiring delivery of products and for services.
Answer: Unearned
Q4) Profit margin =____________ divided by net sales.
Answer: Net Income
Page 5
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Chapter 4: Completing the Accounting Cycle
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Q1) The work sheet is a required report made available to external decision makers. A)True
B)False
Q2) A worksheet can be helpful in showing the effects of proposed or "what if" transactions but not in helping to prepare interim financial statements.
A)True
B)False
Q3) If a company has current assets of $15,000 and current liabilities of $9,500, its current ratio is 1.6
A)True
B)False
Q4) Current liabilities are cash and other resources that are expected to be sold, collected or used within one year or the company's operating cycle whichever is longer. A)True
B)False
Q5) Reversing entries are optional.
A)True
B)False
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Chapter 5: Accounting for Merchandising Operations
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Q1) In a periodic inventory system, cost of goods sold is recorded as each sale occurs.
A)True
B)False
Q2) A perpetual inventory system continually updates accounting records for merchandising transactions.
A)True
B)False
Q3) Expenses to promote sales by displaying and advertising merchandise, make sales, and deliver goods to customers are known as:
A) Cost of goods sold.
B) Selling expenses.
C) Non-operating activities.
D) Purchasing expenses.
E) General and administrative expenses.
Q4) A company's quick assets are $147,000 and its current liabilities are $143,000. This company's acid-test ratio is 1.03.
A)True
B)False
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Chapter 6: Inventories and Cost of Sales
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Q1) Giorgio had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its inventory turnover equals:
A) 0.21.
B) 80.9 days.
C) 4.51.
D) 4.79.
E) 76.1 days.
Q2) Physical counts of inventory:
A) Are necessary to adjust the Inventory account to the actual inventory available.
B) Requires the use of hand-held portable computers.
C) Are not necessary under the cost-to benefit constraint.
D) Are not necessary under the perpetual system.
E) Must be taken at least once a month.
Q3) A merchandiser's ability to pay its short-term obligations depends on many factors including how quickly it sells its merchandise inventory.
A)True
B)False
Q4) Identify and describe the four inventory valuation methods.
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Chapter 7: Accounting Information Systems
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Q1) ______________are the part of the accounting information system that provide the means to take information out of the system and make it available to users.
Q2) The purchases journal is used to record purchases of merchandise on credit.
A)True
B)False
Q3) The following information is available for some of Branson's segments (all amounts are in millions):
\[\begin{array} { | l | l | l | l | }
\hline & \text { North America } & \text { Asia } & \text { Central America } \\
\hline \text { Segment sales } & \$ 5,190 & \$ 750 & \$ 2,350 \\
\hline \text { Segment operating income } & 1,494 & 273 & 1,127 \\
\hline \text { Segment average assets } & 4,700 & 541 & 1,382 \\
\hline
\end{array}\] a. Determine the segment return on assets for each geographic segment. b. Comment on the results. How do the segments compare with respect to profitability?
Q4) The ________ principle requires that an accounting information system aid managers in controlling and monitoring business activities.
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Chapter 8: Cash and Internal Controls
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Q1) When reimbursing the petty cash fund:
A) Appropriate expense accounts are debited.
B) Cash is debited.
C) Petty Cash is debited.
D) Petty Cash is credited.
E) No expenses are recorded.
Q2) ________ reflects the liquidity of a company's accounts receivable.
Q3) The itemized statement of goods prepared by a vendor listing the customer's name, items sold, sales prices, and terms of the sale is called the:
A) Purchase requisition.
B) Invoice approval.
C) Purchase order.
D) Invoice.
E) Receiving report.
Q4) Cash equivalents are short-term highly liquid investment assets that are readily converted to a known cash amount, and have maturities of one year.
A)True
B)False
Q5) List the principles of internal control.
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Chapter 9: Accounting for Receivables
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Q1) The accounts receivable turnover is calculated by dividing average accounts receivable by net sales.
A)True
B)False
Q2) The materiality constraint, as applied to bad debts:
A) Requires that bad debts not be written off.
B) Requires use of the direct write-off method.
C) Requires use of the allowance method for bad debts.
D) Requires that expenses be reported in the same period as the sales they helped produce.
E) Permits the use of the direct write-off method when bad debts expenses are relatively small.
Q3) As long as a company accurately records total credit sales information, it is not necessary to have separate accounts for specific customers.
A)True
B)False
Q4) Define a note receivable and explain how to calculate the interest due on a short-term note receivable.
Q5) The person to whom a note is payable is known as the __________.
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Chapter 10: Plant Assets Natural Resoures and Intangibles
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Q1) A company paid $595,000 for property that included land appraised at $384,000; land improvements appraised at $128,000; and a building appraised at $288,000. The plan is to use the building as a manufacturing plant. Determine the amounts that should be recorded as:
a) Land \(\quad \)\(\quad \)\(\quad \)\(\quad \)\(\quad \)\(\quad \)\(\underline{\$\quad\quad}\)
b) Land Improvements\(\quad \)\(\underline{\$\quad\quad}\)
c) Building\(\quad \)\(\quad \)\(\quad \)\(\quad \)\(\quad \)\(\underline{\$\quad\quad}\)
Q2) A benefit of using an accelerated depreciation method is that:
A) It is preferred by the tax code.
B) It yields a higher income in the early years of the asset's useful life.
C) It yields larger depreciation expense in the early years of an asset's life.
D) The results are identical to straight-line depreciation.
E) It is the simplest method to calculate.
Q3) Explain how to calculate total asset turnover. Describe what it reveals about a company's financial condition, whether a higher or lower ratio is desirable, and how it is best applied for comparative purposes.
Q4) The federal income tax rules for depreciating assets are known as ________.
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Chapter 11: Current Liabilities and Payroll Accounting
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Q1) All of the following statements regarding long-term liabilities are true except?
A) Liabilities that do not have a fixed due date, but are payable on demand, are reported as long-term liabilities.
B) Long-term liabilities can be reported on the balance sheet in a single total or in multiple categories.
C) Long-term liabilities include long-term notes payable, warranty liabilities, lease liabilities, and bonds payable.
D) A single long-term liability can be divided between current and noncurrent sections on the balance sheet.
E) Liabilities not expected to be paid within the longer of one year or the company's operating cycle are reported as long-term liabilities.
Q2) Times interest earned is computed by dividing income before interest expense and income taxes by
Q3) A ________ is a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer.
Q4) Vacation benefits are a type of __________ liability.
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Chapter 12: Accounting for Partnerships
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Q1) Partners in a partnership are not taxed on their withdrawals , but rather on
Q2) If the partnership reports income of $150,000 for its first year, what amount of income is credited to North's capital account?
A) $45,000.
B) $61,500.
C) $63,500.
D) $50,000.
E) $47,500.
Q3) A partnership that has two classes of partners, general and limited, where the limited partners have no personal liability beyond the amounts they invest in the partnership, and no active role in the partnership, except as specified in the partnership agreement is a:
A) Limited liability company.
B) Limited partnership.
C) Mutual agency partnership.
D) Limited liability partnership.
E) General partnership.
Q4) A partner can be admitted into a partnership by ________ or by ________.
Q5) The life of a partnership is ________ in duration.
Page 14
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Chapter 13: Accounting for Corporations
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Q1) Changes in accounting estimates are accounted for in current and future periods.
A)True
B)False
Q2) A stock dividend decreases the market price of the company's stock.
A)True
B)False
Q3) If a company resells treasury stock below the acquisition cost, a loss from the sale of treasury stock is recorded.
A)True
B)False
Q4) A company has 500 shares of $50 par value preferred stock outstanding, and the call price of its preferred stock is $60 per share. It also has 20,000 shares of common stock outstanding, and the total value of its stockholders' equity is $680,000. The company's book value per common share equals:
A) $31.71.
B) $33.17.
C) $32.50.
D) $60.00.
E) $32.75.
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Chapter 14: Long-Term Liabilities
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Q1) When applying equal total payments to a note, with each payment the amount applied to the note principal ________ while the interest expense for the note
Q2) Term bonds are scheduled for maturity on one specified date, whereas serial bonds mature at more than one date.
A)True
B)False
Q3) A bond sells at a discount when the:
A) Contract rate is equal to the market rate.
B) Bond pays interest only once a year.
C) Contract rate is above the market rate.
D) Contract rate is below the market rate.
E) Bond has a short-term life.
Q4) A basic present value concept is that cash paid or received in the future has less value now than the same amount of cash today.
A)True
B)False
Q5) What is a bond? Identify and discuss the different characteristics and features bonds may possess.
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Chapter 15: Investments
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Q1) Bharrat Corporation purchased 40% of Ferris Corporation for $100,000 on January 1. On October 17 of the same year, Ferris Corporation declared total cash dividends of $12,000. At year-end, Ferris Corporation reported net income of $60,000. The balance in the Bharrat Corporation's Long-Term Investment-Ferris account at December 31 should be:
A) $124,000.
B) $80,800.
C) $95,200.
D) $119,200.
E) $100,000.
Q2) ________ are debt securities a company intends and is able to hold until the maturity date.
Q3) Define the foreign exchange rate between two currencies. Explain its effect on business transactions conducted in a foreign currency.
Q4) All companies desire a low return on total assets.
A)True
B)False
Q5) If a U.S. company makes a credit sale to a foreign company, the sales price must be translated into dollars as of the date of______ .
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Chapter 16: Reporting the Statement of Cash Flows
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Q1) An example of a transaction that must be disclosed as a noncash investing and financing activity includes all but which of the following?
A) The purchase of noncash assets in exchange for equity or debt securities.
B) The retirement of debt by issuing equity stock.
C) The leasing of assets in a transaction that qualifies as a capital lease.
D) A transaction exchanging cash equivalents for cash.
E) The purchase of long-term assets financed by a cash down payment and a note payable to the seller for the balance.
Q2) The statement of cash flows reports:
A) Cash inflows and cash outflows for an accounting period.
B) Changes in equity.
C) Equity, net income, and dividends.
D) Assets, liabilities, and equity.
E) Revenues, gains, expenses, and losses.
Q3) Define and discuss the differences between operating, investing, and financing activities.
Q4) Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows.
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Chapter 17: Analysis of Financial Statements
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Q1) Horizontal analysis is used to reveal patterns in data covering successive periods.
A)True
B)False
Q2) Refer to the following selected financial information from Graphics, Inc. Compute the company's times interest earned. \[\begin{array} { | l | r | } \hline & \\
\hline \text { Interest expense } & \$ 9,100 \\
\hline \text { Income tax expense } & 22,700 \\
\hline \text { Net income after tax } & 56,500 \\
\hline
\end{array}\]
A) 9.7.
B) 8.7.
C) 3.7.
D) 2.5.
E) 6.2.
Q3) Market prospects are the ability to generate positive market expectations.
A)True
B)False
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Chapter 18: Managerial Accounting Concepts and Principles
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Q1) A ________ cost changes in total in proportion to changes in the volume of activity.
Q2) The raw materials inventory turnover is raw materials purchased divided by the average raw materials inventory.
A)True
B)False
Q3) Four factors come together in production activity: beginning work in process inventory, raw materials, direct labor, and factory overhead.
A)True
B)False
Q4) An attitude of constantly seeking ways to improve company operations, including customer service, product quality, product features, the production process, and employee interactions, is called:
A) Customer orientation.
B) Total quality measurement.
C) Theory of constraints.
D) Continuous improvement.
E) Just-in-time.
Q5) Identify and describe the three categories of manufacturing costs.
Page 20
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Chapter 19: Job Order Costing
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Q1) A company's ending inventory of finished goods has a cost of $45,000 and consists of 750 units. If the overhead applicable to these goods is $8,400, and overhead is applied at the rate of 60% of direct labor, what is the cost of the direct materials used to produce these units?
Q2) Predetermined overhead rates are calculated at the end of the accounting period once the actual amount of factory overhead is known.
A)True
B)False
Q3) _______________, or customized production, produces products in response to customer orders.
Q4) Since a predetermined overhead rate is established before a period begins, this rate is revised many times during the period to compensate for inaccurate estimates previously made.
A)True
B)False
Q5) A company's predetermined overhead rate is applied at 130% of direct labor cost. How much overhead would be allocated to Job No. 105 if it required total direct labor costs of $60,000?
Q6) When factory payroll for indirect labor is assigned, ________ is debited.
Page 21
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Chapter 20: Process Costing
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Q1) When the final production department completes goods, the cost of the completed goods are transferred to ________.
Q2) If a department that applies process costing starts the reporting period with 50,000 physical units that were 25% complete with respect to direct materials and 40% complete with respect to direct labor, it must add 12,500 equivalent units of direct materials and 20,000 equivalent units of direct labor to complete them.
A)True
B)False
Q3) In process costing, indirect materials are always classified as factory overhead, even if they are linked with a specific production process or department.
A)True
B)False
Q4) Compute the number of physical units transferred to finished goods.
A) 144,000.
B) 165,000.
C) 110,000.
D) 135,000.
E) 105,000.
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Chapter 21: Cost-Volume-Profit Analysis
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Q1) The variable costing method is required for external financial reporting.
A)True
B)False
Q2) At Midland Company's break-even point of 9,000 units, fixed costs are $180,000 and variable costs are $540,000 in total. The unit sales price is:
A) $60.
B) $20.
C) $80.
D) $100.
E) $40.
Q3) A company sells a single product that has a contribution margin ratio of 28%. If the company's total fixed costs are $84,000, what is the break-even point in dollar sales?
Q4) Scatter diagrams plot volume (units) on the vertical axis and cost on the horizontal axis.
A)True
B)False
Q5) The difference between the unit sales price and the unit variable cost of an item is defined as the________.
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Chapter 22: Master Budgets and Planning
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Q1) Funcycle Manufacturing's budget includes the following credit sales for the current year: September, $145,000; October, $136,000; November, $120,000; December, $157,000. Experience has shown that payment for the credit sales is received as follows: 15% in the month of sale, 50% in the first month after sale, and 35% in the second month after sale. What are the cash collections of credit sales in the month of December?
A) $83,550.
B) $107,600.
C) $157,000.
D) $131,150.
E) $23,550.
Q2) What is a capital expenditures budget?
Q3) The merchandise purchases budget is the starting point for preparing the master budget of a merchandiser.
A)True
B)False
Q4) What is activity-based budgeting?
Q5) The ________ shows the budgeted costs for factory overhead that will be needed to complete the estimated production for the period, often separated into variable and fixed costs.
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Chapter 23: Flexible Budgets and Standard Costs
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Q1) Georgia, Inc. has collected the following data on one of its products. The direct materials price variance is: Direct materials standard (4 lbs. @ $1/lb.) $ 4 per finished unit
Total direct materials cost variance-unfavorable $ 13,750 Actual direct materials used 150,000 lbs.
<sup>Actual</sup><sup> </sup><sup>finished</sup><sup> </sup><sup>units</sup><sup> </sup><sup>produced</sup><sup> 30,000 </sup><sup> </sup>units
A) $16,250 unfavorable.
B) $16,250 favorable.
C) $30,000 unfavorable.
D) $33,000 favorable.
E) $13,750 unfavorable.
Q2) A company's flexible budget for 60,000 units of production showed sales of $96,000, variable costs of $36,000, and fixed costs of $26,000. What operating income would be expected if the company produces and sells 70,000 units?
Q3) Explain variance analysis. Describe how variance analysis assists managers.
Q4) What is the overhead volume variance? What would be the cause of a favorable volume variance?
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Chapter 24: Performance Measurement and Responsibility Accounting
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Q1) The amount of salaries that should be allocated to Drilling for the current period is:
A) $10,000.
B) $12,000.
C) $18,000.
D) $30,000.
E) $15,000.
Q2) A company produces two joint products (called 301 and 302) in a single operation that uses one raw material called Fruge. Four hundred gallons of Fruge were purchased at a cost of $800 and were used to produce 150 gallons of Product 301, selling for $5 per gallon, and 75 gallons of Product 302, selling for $15 per gallon. How much of the $800 cost should be allocated to each product, assuming that the company allocates cost based on sales revenue?
Q3) Departmental contribution to overhead is the same as gross profit generated by that department.
A)True
B)False
Q4) A ________ provides information for managers to use to evaluate the profitability or cost effectiveness of each department's activities.
Page 26
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Chapter 25: Capital Budgeting and Managerial Decisions
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Q1) Assuming Benjamin has excess capacity and accepts the offer, its profits will:
A) Increase by $4,300.
B) Increase by $6,000.
C) Decrease by $6,000.
D) Increase by $30,000.
E) Increase by $5,200.
Q2) A company is considering a proposal to invest $40,000 in a project that would provide the following net cash flows:
\[\begin{array} { l l }
\text { Year 1 } & \$ 6,500 \\
\text { Year 2 } & 12,700 \\
\text { Year 3 } & 15,000 \\
\text { Year 4 } & 12,800
\end{array}\] \[\begin{array} { l l }
\text { Year 1 } & \$ 6,500 \\
\text { Year 2 } & 12,700 \\
\text { Year 3 } & 15,000 \\
\text { Year 4 } & 12,800
\end{array}\] Compute the project's payback period.
Q3) Identify the five steps involved in managerial decision making.
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Chapter 26: Present and Future Values in Accounting
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Q1) A company has $46,000 today to invest in a fund that will earn 4% compounded annually. How much will the fund contain at the end of 6 years?
Q2) Kelsey has a loan that requires a $25,000 lump sum payment at the end of three years. The interest rate on the loan is 5%, compounded annually. How much did Kelsey borrow today?
Q3) Explain the concept of the future value of an annuity.
Q4) A company needs to have $150,000 in 5 years, and will create a fund to insure that the $150,000 will be available. If it can earn a 6% return compounded annually, how much must the company invest in the fund today to equal the $150,000 at the end of 5 years?
Q5) The present value factor for determining the present value of $6,300 to be received three years from today at 10% interest compounded semiannually is 0.7462. (<sup>PV</sup><sup> </sup><sup>of</sup><sup> </sup><sup>$1</sup>, <sup>FV</sup><sup> </sup><sup>of</sup><sup> </sup><sup>$1</sup>, <sup>PVA</sup><sup> </sup><sup>of</sup><sup> </sup><sup>$1</sup>, and <sup>FVA</sup><sup> </sup><sup>of</sup><sup> </sup><sup>$1</sup>) (Use appropriate factor(s) from the tables provided.)
A)True
B)False
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Chapter 27: Activity-Based Costing
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/69634
Sample Questions
Q1) How much overhead cost would be assigned to Product KL37 using the activity-based costing System?
A) $5,874.82
B) $10,385.22
C) $6,516.61
D) $5,562.61
E) $1,595.79
Q2) According to the activity-based costing system, the total overhead cost of producing 430 units of A21W is:
A) $13,338.20
B) $11,121.40
C) $12,440.20
D) $12,215.70
E) $32,370.00
Q3) In activity-based costing, all overhead is lumped together and a predetermined overhead rate per unit of an allocation base, is computed and used to assign overhead to jobs and processes.
A)True B)False
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