Business Accounting
Pre-Test Questions
Course Introduction
Business Accounting provides an in-depth introduction to the fundamental concepts and practices of accounting as they relate to business operations. The course covers essential topics such as the accounting cycle, preparation and analysis of financial statements, principles of double-entry bookkeeping, and the use of accounting information for decision making. Students will also explore key financial ratios, ethical considerations, and the impact of accounting regulations. By the end of the course, learners will gain a solid foundation in interpreting financial data and applying accounting techniques to support effective business management.
Recommended Textbook
Cornerstones of Financial Accounting 2nd Edition by Jay Rich
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12 Chapters
1918 Verified Questions
1918 Flashcards
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Page 2
Chapter 1: Accounting and the Financial Statements
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202 Verified Questions
202 Flashcards
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Sample Questions
Q1) List three different groups of users of accounting information.Indicate the type of decisions each group typically makes from accounting information.
Answer: The groups and their decisions are: \(\begin{array}{llcc}
\text { Stockholders:} & \text { Is the company profitable enough to pay dividends? } \\
& \text { Did the company make a profit for the period?} \\
\text { Management: } & \text { How should an item be priced? Should we continue operations? } \\
& \text { Canwe give employeestaises? } \\
\text { Bankers: } & \text { Can the company pay interest and principal when it comes due? } \\
\text {Creditors: } & \text { Can the company pay bills when they are chue? } \\
\text { Government: } & \text {How much did the company eam? (i.e., how much taxes should be paid? } \\ \end{array}\)
Q2) The current ratio is found by dividing current assets by ____________________. Answer: current liabilities
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Page 3
Chapter 2: The Accounting Information System
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177 Verified Questions
177 Flashcards
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Sample Questions
Q1) A company purchased equipment for $150,000 cash.What is the effect on total assets?
A)Increase
B)Decrease
C)No net effect
D)Cannot be determined from this limited information.
Answer: C
Q2) The payment of employee salaries has what effect on the accounting equation?
A)Assets and stockholders' equity decrease
B)Liabilities and stockholders' equity decrease
C)Assets decrease and liabilities increase
D)Assets increase and liabilities decrease
Answer: A
Q3) Income statement accounts have normal credit balances.
A)True
B)False
Answer: False
Q4) The ____________________ is a list of all the accounts used by an entity. Answer: chart of accounts
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Chapter 3: Accrual Accounting
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162 Verified Questions
162 Flashcards
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Sample Questions
Q1) Accrued expenses originate from
A)paying off liabilities.
B)paying for items such as insurance in advance.
C)collecting cash from customers.
D)incurring expenses without yet having paid cash for them.
Answer: D
Q2) The following are selected data from a large company's financial statements: \(\begin{array}{llcc}
\text { Net income } & \text { \$ 12,400 million }\\
\text { Cash dividends } & \text { 2,000 million }\\
\text { Retained earnings, December 31,2013 }& \text { 8,500 million }\\ \end{array}\)
Identify the steps in the accounting cycle that must have been completed prior to determining these amounts.
Answer: Steps in accounting cycle are:
1. Collect and analyze information from source documents
2. Journalize transactions
3. Post transactions to ac counts in the ledger
4. Adjust the accounts
5. Prepare financial statements
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Page 5
Chapter 4: Internal Control and Cash
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162 Verified Questions
162 Flashcards
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Sample Questions
Q1) Which one of the following statements regarding internal control is false?
A)It is not possible to design a system of internal controls that is foolproof.
B)A well-designed system of internal controls should be the goal of every organization whether for profit or not-for-profit.
C)Separation of duties is the easiest control activity to implement in small companies.
D)It is easiest to implement effective internal controls in large companies which are able to devote substantial resources to those systems.
Q2) Which of the following is<b> not</b> a generally recognized internal control activity?
A)Establishment of clear lines of authority to carry out specific tasks
B)Preparation of bank reconciliations on a monthly basis
C)Reducing the cost of hiring seasonal employees
D)Limiting access to computerized accounting records
Q3) Business process risk assessment is designed to identify,analyze,and manage possible threats to the organization's success concerning ____________________ forces such as resource allocations.
Q4) Why is cash management necessary?
Q5) What adjustments are often necessary after the reconciliation of a bank account?
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Page 6
Chapter 5: Sales and Receivables
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Refer to Atlantis Tropicals.Determine the effect on the company's accounting equation of the year-end adjustment of bad debts using the aging approach.
\(\begin{array}{|l|l|l|}
\hline \text { Assets } & =\text { Liabilities } & \text { + Stockhollers'Equity } \\
\hline & & \\
\hline & & \\
\hline & & \\
\hline & & \\
\hline \end{array}\)
Q2) Refer to Accelerated Solutions.What is the balance of Accounts Receivable at December 31,2012?
A)$700,000
B)$340,000
C)$690,000
D)$710,000
Q3) Refer to Accutemp Heating & Air.How much total interest revenue will the company recognize over the term of the note?
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Chapter 6: Cost of Goods Sold and Inventory
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191 Verified Questions
191 Flashcards
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Sample Questions
Q1) An overstatement error in the inventory account in the current period will result in an understatement of ____________________ in the subsequent period
Q2) Which of the following statements is false?
A)The inventory account is updated after every sale and after every merchandise purchase under the perpetual inventory system.
B)The inventory account is updated only at the end of the accounting period under the periodic inventory system.
C)A cost of goods sold account is updated after each sale of merchandise under the periodic inventory system.
D)A purchases account is used only under the periodic inventory system.
Q3) When a company using LIFO experiences a partial or complete liquidation of its older,lower-priced inventory,its gross margin will be ____________________ for the period.
Q4) Sales discounts decrease the cost of inventory acquired.
A)True
B)False
Q5) Under the _______________ inventory system,the inventory account is updated after each purchase or sale.
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Chapter 7: Operating Assets
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Sample Questions
Q1) A company purchased a building for $900,000 on January 1,2013.The building is being depreciated over 40 years with an estimated residual value of $100,000.What will be the book value of the building in ten years?
A)$575,000
B)$600,000
C)$675,000
D)$700,000
Q2) A research consortium has a large portion of its plant assets concentrated in an area where technology is rapidly changing.The organization wants to minimize taxable income and maximize net income reported to shareholders.Recommend a course of action for accomplishing this objective and provide support for your recommendation.
Q3) Explain the meaning or significance of the following ratios:
A) Fixed asset turnover ratio
B) Average age of property, plant, and equipment
Q4) The ______________ depreciation method is the GAAP depreciation method used most frequently.
Q5) All intangible assets are subject to amortization.
A)True
B)False
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Chapter 8: Current and Contingent Liabilities
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139 Flashcards
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Sample Questions
Q1) Refer to the partial balance sheet presented above for Glass Doctor.Compute the following liquidity ratios for 2014 and 2013: Curent Ratio
Quick Ratio
Cash Ratio
Operating Cash Flow Ratic Assume that Glass Doctor's statement of cash flows presented cash flows from operating activities of $204.6 million and $201.1 million for the years ended December 31,2014 and 2015,respectively.Comment on the direction and significance of the change in the ratios from 2013 to 2014.
Q2) When a company records the gross wages paid to its employees,the accounts to be credited include various taxes payable and ____________________
Q3) Long-term assets are $5,000,current liabilities are $700,and long-term liabilities are $3,000 and the operating cash flow ratio is 1.1,then the company's cash flows from operating activities will be
A)$ 700
B)$ 770
C)$3,300
D)$5,500
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Chapter 9: Long-Term Liabilities
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Sample Questions
Q1) Kid Karate issued $100,000 of 6%,10 year bonds when the market rate of interest was 5%.The proceeds from this bond issue were $107,000.Using the effective interest method of amortization,which of the following statements is true? Assume interest is paid annually.
A)Interest payments to bondholders each period will be $5,000.
B)Interest payments to bondholders each period will be $5,350.
C)Amortization of the premium for the first interest period will be $5,000.
D)Amortization of the premium for the first interest period will be $650.
Q2) A convertible bond is one where
A)the issuer can convert from a fixed interest rate to a floating rate.
B)the issuer can convert the bond from long-term to short-term.
C)the issuer can retire the bond before its specified maturity date.
D)the bondholder can convert the bond into common stock at a future time.
Q3) The amortization of a bond premium increases the effective interest expense incurred each period for the issuer.
A)True
B)False
Q4) The ____________________ rate of interest is a function of economic factors and the creditworthiness of the borrower
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) All of the following are reasons that a corporation may purchase treasury stock <b>except</b>:
A)it needs the stock for its employee stock bonus program.
B)it desires to make an investment in its own stock.
C)to buy out the ownership of stockholders.
D)to increase the reported amount of earnings per share.
Q2) If a corporation declares a 2-for-1 stock split,which of the following is true?
A)A journal entry is required to show the effect on the stockholders' equity accounts.
B)The stockholders will have a higher proportionate ownership share after the split.
C)The par value will be reduced to half of the pre-split par value.
D)The market price of the stock is expected to increase after the split.
Q3) A stock option is the same as a stock warrant.
A)True
B)False
Q4) Preferred stockholders typically do not have the right to vote at stockholders meetings.
A)True
B)False
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Page 12
Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) Increases in Cash = Increases in Liabilities + Increases in Stockholders' Equity + Decreases in Noncash Assets.
A)True
B)False
Q2) Which of the following operating activities results in a cash outflow?
A)Paying creditors for merchandise
B)Collecting accounts receivable
C)Making cash sales
D)Receiving deposits recorded as unearned revenue
Q3) "You Decide" Essay
You are the Controller for McBride & Associates.Your accounting intern from the local university has been assigned the task of preparing your company's statement of cash flows.The intern has come to you with a question.She is not sure how to report some dividends the company had received during the year.She explains that on first thought,it seems like dividends represent a financing activity since they are related to shares of stock that companies issue to finance their businesses.But she is having second thoughts.Explain to your intern how dividends (both received and paid)should be classified on the cash flow statement.
Q4) What is the amount of cash and cash equivalents at the end of 2014?
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Chapter 12: Financial Statement Analysis
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152 Flashcards
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Sample Questions
Q1) In ____________________ analysis,each financial statement line item is expressed as a percent of the largest amount on the statement,which is net sales for the income statement and total assets for balance sheet.
Q2) The three aspects of return on equity (ROE)recognized by DuPont analysis are the net profit margin percentage,the ____________________ ratio,and leverage.
Q3) Refer to Rapid Sign Corporation.What is the stock repurchase payout ratio for 2015?
A)63.8%
B)51.7%
C)35.1%
D)0
Q4) Trend analysis is another name for ____________________ analysis.
Q5) The amount of working capital is more meaningful to users than the current ratio because working capital provides information on the composition of the current accounts.
A)True
B)False
Q6) A company's relative mix of debt and equity financing is referred to as its __________ structure.
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