Business Accounting
Pre-Test Questions
Course Introduction
Business Accounting is an essential course that introduces students to the principles and practices of financial and managerial accounting within the context of a business environment. The course covers the fundamental concepts of accounting, including bookkeeping, preparation of financial statements, analysis of financial data, and the interpretation of financial information for decision-making purposes. Students will learn how to record business transactions, understand the accounting cycle, and apply accounting standards to real-world business scenarios. Emphasis is placed on the use of accounting information for budgeting, performance evaluation, and strategic planning, equipping students with the analytical skills necessary for effective financial management in both small and large organizations.
Recommended Textbook
Corporate Financial Accounting 12th Edition by Carl S. Warren
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Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) The balance sheet represents the accounting equation.
A)True
B)False
Answer: True
Q2) Denzel Jones is the major stockholder of Crystal Cleaning Company.Recently,Denzel received $10,000 of dividends from Crystal Cleaning.After receiving the dividends,he contributed $6,000,in his name,to Habitat for Humanity.The contribution of $6,000 should be recorded on the accounting records of which of the following entities?
A)Crystal Cleaning and Habitat for Humanity
B)Denzel Jones' personal records and Habitat for Humanity
C)Denzel Jones' personal records and Crystal Cleaning
D)Denzel Jones' personal records,Crystal Cleaning,and Habitat for Humanity
Answer: B
Q3) Which of the following is a manufacturing business?
A)Amazon.com.
B)Wal-Mart.
C)Ford Motors.
D)Delta Airlines
Answer: C
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Chapter 2: Analyzing Transactions
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Sample Questions
Q1) The trial balance is out of balance and the accountant suspects that a transposition or slide error has occurred.What will the accountant do to find the error?
A)Determine the amount of the error and look for that amount on the trial balance.
B)Determine the amount of the error and divide by two,then look for that amount on the trial balance.
C)Determine the amount of the error and refer to the journal entries for that amount.
D)Determine the amount of the error and divide by nine.If the result is evenly divided,then this type of error is likely.
Answer: D
Q2) Expenses use up assets or consume services in the process of generating revenues. A)True
B)False
Answer: True
Q3) Prepare a journal entry on October 12 for the fees earned on account,$14,600.
Answer: 11ea906a_d1c4_575a_aec7_59d824a6a683_TB2051_00
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4
Chapter 3: The Adjusting Process
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Sample Questions
Q1) Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned.
A)True
B)False
Answer: True
Q2) Adjusting journal entries are dated on the last day of the period.
A)True
B)False
Answer: True
Q3) Fees receivable would appear on the balance sheet as a(n)
A)asset
B)liability
C)fixed asset
D)unearned revenue
Answer: A
Q4) An example of deferred revenue is Unearned Rent.
A)True
B)False
Answer: True
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) On the balance sheet,stockholders' equity is
A)added to assets and the two are equal to liabilities
B)added to liabilities and the sum of the two are equal to assets
C)subtracted from liabilities and the net amount is equal to assets
D)subtracted from assets and the net amount is equal to net income
Q2) Current liabilities are those liabilities that
A)will be paid in less than one year
B)are due to be paid in 5 to 10 years
C)are due to be paid in more than one year
D)are owed to the stockholders and will never be paid
Q3) On March 1,a company collects revenue in advance for the next twelve months and credits a liability account.The adjusting entry at year end on the work sheet would
A)increase a liability account
B)decrease an asset account
C)decrease a revenue account
D)decrease a liability account
Q4) A work sheet heading is dated for a period of time.
A)True
B)False
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Chapter 5: Accounting for Merchandising Businesses
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Sample Questions
Q1) The entry to record the return of merchandise from a customer would include a
A)debit to Sales
B)credit to Sales
C)debit to Sales Returns and Allowances
D)credit to Sales returns and Allowances
Q2) Maxi Company's perpetual inventory records indicate that $820,300 of merchandise should be on hand on October 31,2014.The physical inventory indicates that $781,900 is actually on hand.Journalize the adjusting entry for the inventory shrinkage for Maxi Company for the year ended October 31,2014.
Q3) Merchandise with a sales price of $6,000 is sold on account with term 2/10,n/30.The journal entry to record the sale would include a
A)debit to Cash for $6,000
B)Debit to Sales Discounts for $120
C)Credit to Sales for $6,000
D)Debit to Accounts Receivable for $5,880
Q4) In a merchandise business,sales minus operating expenses equals net income.
A)True
B)False
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Chapter 6: Inventories
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Sample Questions
Q1) In valuing damaged merchandise for inventory purposes,net realizable value is the estimated selling price less any direct costs of disposal.
A)True
B)False
Q2) The inventory costing method that reports the earliest costs in ending inventory is
A)FIFO
B)LIFO
C)Average cost
D)Specific identification
Q3) Inventory controls start when the merchandise is shelved in the store area.
A)True
B)False
Q4) A purchase order establishes an initial record of the receipt of the inventory.
A)True
B)False
Q5) Safeguarding inventory from damage or theft is a primary objective for the control of inventory.If you were running a clothing store,name three specific controls you would implement to guard inventory from theft.
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Chapter 7: Sarbanes-Oxley, internal Control, and Cash
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Sample Questions
Q1) In preparing a bank reconciliation,the amount indicated by a debit memo for bank service charges is added to the balance per company's records.
A)True
B)False
Q2) A necessary element of internal control is
A)database
B)systems design
C)systems analysis
D)information and communication
Q3) Most companies who have several bank accounts,petty cash,and cash on hand,would list each separately on the balance sheet.
A)True
B)False
Q4) Which of the following should not be considered cash by an accountant?
A)money orders
B)bank checking accounts
C)postage stamps
D)travelers' checks
Q5) Why would a bank require a company to maintain a compensating balance?
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Chapter 8: Receivables
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Sample Questions
Q1) When using the allowance method to estimate uncollectible accounts receivable based on an analysis of receivables shows that $640 of accounts receivables are uncollectible.The Allowance for Doubtful Accounts has a debit balance of $110.The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of:
A)$110
B)$640
C)$530
D)$750
Q2) Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment),and an analysis of accounts in the customer ledger indicates the estimated amount of uncollectible accounts should be $16,000.Based on the estimate above,which of the following adjusting entries should be made?
A)debit Bad Debt Expense,$800;credit Allowance for Doubtful Accounts,$800
B)debit Bad Debt Expense,$15,200;credit Allowance for Doubtful Accounts,$15,200
C)debit Allowance for Doubtful Accounts,$800;credit Bad Debt Expense,$800
D)debit Bad Debt Expense,$16,800;credit Allowance for Doubtful Accounts,$16,800
Q3) Other than accounts receivable and notes receivable,name other receivables that might be included in the general ledger.
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Page 10
Chapter 9: Fixed Assets and Intangible Assets
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Sample Questions
Q1) Land acquired as a speculation is reported under Investments on the balance sheet.
A)True
B)False
Q2) Capital expenditures are costs that are charged to Stockholders' Equity accounts.
A)True
B)False
Q3) Which of the following below is an example of a capital expenditure?
A)cleaning the carpet in the front room
B)tune-up for a company truck
C)replacing an engine in a company car
D)replacing all burned-out light bulbs in the factory
Q4) If a fixed asset with a book value of $10,000 is traded for a similar fixed asset,and a trade-in allowance of $15,000 is granted by the seller,if the transaction is deemed to have commercial substance,the buyer would report a gain on disposal of fixed assets of $5,000.
A)True
B)False
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11
Chapter 10: Current Liabilities and Payroll
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Sample Questions
Q1) Payroll taxes are based on the employee's net pay.
A)True
B)False
Q2) One of the more popular defined contribution plans is the 401k plan.
A)True
B)False
Q3) Amounts withheld from each employee for Social Security and Medicare varies by state.
A)True
B)False
Q4) An unfunded pension liability is reported on the balance sheet as
A)current liability
B)owner's equity
C)long-term liability
D)current liability or long-term liability,depending upon when the pension liability is to be paid
Q5) Internal controls for cash payments also apply to payrolls.
A)True
B)False
Q6) List five internal controls that relate directly to payroll.
Page 12
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Chapter 11: Corporations: Organization, stock Transactions, and Dividends
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Sample Questions
Q1) Characteristics of a corporation include
A)shareholders who are mutual agents
B)direct management by the shareholders (owners)
C)its inability to own property
D)shareholders who have limited liability
Q2) A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of $120.If the corporation issues a 5-for-1 stock split,the par value of the stock after the split will be:
A)$5
B)$60
C)$25
D)$24
Q3) If common stock is issued for an amount greater than par value,the excess should be credited to
A)Retained Earnings.
B)Cash.
C)Legal Capital.
D)Paid-in Capital in Excess of Par Value.
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Chapter 12: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) On the first day of the fiscal year,a company issues a $1,000,000,7%,5 year bond that pays semi-annual interest of $35,000 ($1,000,000 ´ 7% ´ 1/2),receiving cash of $884,171.Journalize the first interest payment and the amortization of the related bond discount using the straight-line method.Round answer to the nearest dollar.
Q2) If the straight-line method of amortization is used,the amount of unamortized premium on bonds payable will decrease as the bonds approach maturity.
A)True
B)False
Q3) The market interest rate related to a bond is also called the
A)stated interest rate
B)effective interest rate
C)contract interest rate
D)straight-line rate
Q4) Premium on bonds payable may be amortized by the straight-line method if the results obtained by its use do not materially differ from the results obtained by use of the interest method.
A)True
B)False
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Chapter 13: Investments and Fair Value Accounting
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Sample Questions
Q1) Accounting for the sale of stock is the same for both the cost and the equity methods of accounting for investments.
A)True
B)False
Q2) When a corporation owns less than 20% of the stock of another company,dividends received are not treated as income.
A)True
B)False
Q3) Sutton Company purchased 10% of the outstanding stock of Roberts Company on January 1,2012.Roberts reported net income of $155,000 and declared dividends of $40,000 during 2012.How would these events be reported by Sutton using the cost method?
Q4) Edison Corporation paid a dividend of $10 per share on its $100 par preferred stock and $4 per share on its $20 par common stock.The market value of the common stock is $80 per share.Edison's dividend yield is:
A)5%
B)10%
C)25%
D)20%
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) Rogers Company reported net income of $35,000 for the year.During the year,accounts receivable increased by $7,000,accounts payable decreased by $3,000 and depreciation expense of $8,000 was recorded.Net cash provided by operating activities for the year is
A)$53,000.
B)$47,000.
C)$33,000
D)$37,000.
Q2) The statement of cash flows is not useful for:
A)planning future investing and financing activities
B)determining a company's ability to pay its debts
C)determining a company's ability to pay dividends
D)calculating the net worth of a company
Q3) Cash flows from operating activities,as part of the statement of cash flows,include cash transactions that enter into the determination of net income.
A)True
B)False
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16
Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) The relationship of $325,000 to $125,000,expressed as a ratio,is
A)2.0 to 1
B)2.6 to 1
C)2.5 to 1
D)0.45 to 1
Q2) Which one of the following is not a characteristic generally evaluated in ratio analysis?
A)liquidity
B)profitability
C)solvency
D)marketability
Q3) Percentage analyses,ratios,turnovers,and other measures of financial position and operating results are
A)a substitute for sound judgment.
B)useful analytical measures.
C)enough information for analysis,industry information is not needed.
D)unnecessary for analysis,but reaction is better.
Q4) In horizontal analysis,the current year is the base year.
A)True
B)False
Page 17
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