Business Accounting Review
Questions
Course Introduction
Business Accounting provides students with a comprehensive introduction to the principles and practices of accounting within a business context. The course covers key topics such as the recording and interpretation of financial transactions, preparation of financial statements, and analysis of financial information for decision-making. Students will develop an understanding of the accounting cycle, double-entry bookkeeping, and relevant accounting standards. By the end of the course, learners will be equipped with the foundational skills necessary to analyze financial data, ensure regulatory compliance, and contribute to effective management within various types of organizations.
Recommended Textbook
Financial Accounting 12th Edition by C.
William Thomas
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14 Chapters
2062 Verified Questions
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Page 2
Chapter 1: The Financial Statements
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Sample Questions
Q1) The Statement of Retained Earnings is used to prepare the:
A)Income Statement.
B)Statement of Assets.
C)Statement of Cash Flows.
D)Balance Sheet.
Answer: D
Q2) Owners' equity consists of two accounts,Amy Jones,Capital,and Mindy Lenz,Capital.This indicates the entity is a:
A)proprietorship.
B)corporation.
C)not-for-profit.
D)partnership.
Answer: D
Q3) David Company has total assets of $500,000 and total liabilities of $180,000.David Company's stockholders' equity must therefore be $680,000.
A)True
B)False
Answer: False
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3
Chapter 2: Transaction Analysis
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Sample Questions
Q1) A company borrowed $15,000 from the bank by signing a long-term note.How does this transaction affect the accounting equation?
A)Add $15,000 to Cash and add $15,000 to Accounts Payable.
B)Add $15,000 to Cash and add $15,000 to Notes Payable.
C)Add $15,000 to Cash and add $15,000 to Retained Earnings.
D)Add $15,000 to Accounts Receivable and add $15,000 to Accounts Payable.
Answer: B
Q2) The journal is a grouping of all the T-accounts,with their balances.
A)True
B)False
Answer: False
Q3) A bookkeeper forgot to post a credit to Accounts Receivable,but did post the debit part of the journal entry correctly.Then:
A)the trial balance would still balance.
B)total debits would exceed total credits on the trial balance.
C)total credits would exceed total debits on the trial balance.
D)total debits and total credits would both be incorrect on the trial balance.
Answer: B
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Chapter 3: Accrual Accounting Income
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Sample Questions
Q1) One company's prepaid expense is another company's unearned revenue.
A)True
B)False
Answer: True
Q2) When classifying assets and liabilities on the balance sheet:
A)assets are classified as liquid and non-liquid.
B)for most businesses the operating cycle is two years.
C)furniture and fixtures are long-term assets.
D)current liabilities include accounts receivable.
Answer: C
Q3) Every adjusting entry must affect both the income statement and the balance sheet.
A)True
B)False Answer: True
Q4) A classified balance sheet separates current assets from long-term assets and current liabilities from long-term liabilities.
A)True
B)False Answer: True
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Chapter 4: Internal Control Cash
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Sample Questions
Q1) There are three parties to a check.The person who signs the check is the:
A)maker.
B)payee.
C)draftee.
D)promisee.
Q2) The bookkeeper recorded a payment on account as $150 instead of the correct amount of $510.What journal entry is required?
A)Debit Accounts Payable for $510 and credit Cash for $510.
B)Debit Accounts Receivable for $510 and credit Cash for $510.
C)Debit Accounts Payable for $360 and credit Cash for $360.
D)Debit Cash for $360 and credit Accounts Payable for $360.
Q3) Cash equivalents include:
A)certificates of deposit.
B)inventory held for sale.
C)accounts receivable.
D)high-grade U.S.or foreign government securities that are very close to maturity (three months or less from the balance sheet date).
Q4) List and briefly discuss the five objectives of internal control.
Q5) List the five internal control procedures.
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Chapter 5: Receivables and Revenue
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Sample Questions
Q1) The shipping terms in the sales contract determine when ownership of goods changes hands between the buyer and the seller.
A)True
B)False
Q2) A company borrows $10,000 from the bank at 10% interest for sixty days.$10,000 is the ________ of the note.The maturity value of the note is ________.For computation of interest,use a 365-day year.(Round your final answer to the nearest dollar. )
A)maturity value;$10,164
B)present value;$10,000
C)future value;$10,000
D)principal;$10,164
Q3) Step 3 of the revenue recognition model requires that the seller set the price of the sale at the amount the seller expects to receive from the customer.
A)True
B)False
Q4) The higher the quick ratio,the easier it is to pay current liabilities.
A)True
B)False
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Chapter 6: Inventory Cost of Goods Sold
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Sample Questions
Q1) Which statement is FALSE?
A)Many U.S.companies that currently use LIFO for their U.S.operations must use another method if they have operations in foreign countries.
B)IFRS does not permit the use of LIFO.
C)IFRS does permit the FIFO method.
D)If LIFO is no longer allowed to be used in the United States,the tax burden on many companies will be lower.
Q2) The gross profit method cannot be used for calculating inventory destroyed by a disaster,such as a fire.
A)True
B)False
Q3) A 30% gross profit percentage means that:
A)for each dollar of sales,the company has a cost of goods sold of seventy cents.
B)for each dollar of sales,the company has a gross profit of thirty cents.
C)for each dollar of sales,the company has a cost of goods sold of thirty cents.
D)A and B
Q4) Why does U.S.GAAP require companies to apply the lower-of-cost-or-market rule to inventories?
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Page 8
Chapter 7: Plant Assets, natural Resources, Intangibles
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Sample Questions
Q1) What is the impairment test for long-term plant assets?
A)Is the net book value greater than the fair value?
B)Is the fair value greater than the net book value?
C)Is the net book value greater than the estimated future cash flows?
D)Are the estimated future cash flows greater than the net book value?
Q2) The book value of a plant asset is defined as:
A)historical cost minus estimated residual value.
B)historical cost minus accumulated depreciation.
C)current sales value minus historical cost.
D)replacement cost minus accumulated depreciation.
Q3) The ________ method is used to allocate the cost of multiple assets acquired in a basket purchase.
A)book-value
B)cost
C)gross margin ratio
D)relative-sales-value
Q4) a.What does total asset turnover measure?
b.List three ways in which asset turnover can be increased.
Q5) What is the distinction between a capital expenditure (for a long-term asset)and an immediate expense?
Page 9
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Chapter 8: Current and Contingent Liabilities
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Sample Questions
Q1) The FASB provides guidelines to account for contingent liabilities by:
A)adjusting journal entries only.
B)footnote disclosures only.
C)journal entries and footnote disclosures.
D)preparing a new financial statement.
Q2) Which account is NOT an example of an accrued liability?
A)sales tax payable
B)wages payable
C)interest payable
D)accounts payable
Q3) The balance of the Unearned Revenue account becomes zero when a company has earned all of the revenue it had collected in advance.
A)True
B)False
Q4) Current liabilities are mostly for:
A)operating activities
B)financing activities.
C)investing activities.
D)both A and B.
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Chapter 9: Long-Term Liabilities
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Sample Questions
Q1) Bonds with a face value of $310,000 are issued at 103.The statement of cash flows would report a cash inflow of:
A)$310,000 in the financing activities section.
B)$319,300 in the financing activities section.
C)$9,300 in the financing activities section.
D)$310,000 in the investing activities section.
Q2) Details about a company's liabilities should be included in the notes to the financial statements.
A)True
B)False
Q3) Bonds that are secured by real estate are called:
A)term bonds.
B)secured bonds.
C)mortgage bonds.
D)B and C.
Q4) Premium on bonds payable is a contra account to bonds payable.
A)True
B)False
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) Before a company can pay dividends to the common stockholders,the owners of cumulative preferred stock must receive:
A)the current year's dividends,but not dividends in arrears.
B)neither the current year's dividends nor dividends in arrears.
C)all dividends in arrears plus the current year's dividends.
D)all dividends in arrears,but not the current year's dividends.
Q2) The price-earnings ratio is the same amount as the market value per share.
A)True
B)False
Q3) The purchase of treasury stock decreases the number of shares outstanding. A)True
B)False
Q4) Bloom Corporation issued 60,000 shares of common stock.Bloom purchased 9000 shares and later reissued 900 shares.How many shares are issued and outstanding?
A)51,000 issued and 51,000 outstanding
B)60,000 issued and 51,000 outstanding
C)51,900 issued and 51,900 outstanding
D)60,000 issued and 51,900 outstanding
Q5) List three reasons why corporations purchase their own stock.
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) Usually,the most important category on the statement of cash flows is cash flows from:
A)operating activities.
B)investing activities.
C)financing activities.
D)noncash activities.
Q2) Because income and cash flow usually move together,net income and cash flow also move together.
A)True
B)False
Q3) Google Inc.paid $10.6 billion to acquire other companies.Google also paid $33 billion to purchase long-term securities.How are these cash outflows classified on the statement of cash flows?
A)financing activities
B)operating activities
C)investing activities
D)noncash investing and financing activities
Q4) The statement of cash flows is an optional statement. A)True B)False
Page 13
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) You are using a leading competitor,Company B,for benchmarking your company,Company A.When benchmarking,the gross margin of Company A is expressed as a percentage of:
A)the net sales of Companies A and B.
B)Company B's net sales.
C)Company A's net income.
D)Company A's net sales.
Q2) MD&A stands for:
A)Management's Discussion and Analysis.
B)Management's Decisions and Analysis.
C)Marketing Discussion and Analysis.
D)Marketing Decisions and Analysis.
Q3) A company has return on assets of 8%.Return on sales are 4%.The leverage ratio is 3.0.Following DuPont analysis,what is return on equity?
A)4%
B)8%
C)24%
D)12%
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Chapter 13: Investments
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Sample Questions
Q1) For accounting purposes,the method used to account for long-term investments in common stock is determined by:
A)the size of the investor.
B)the size of the investor when compared to the size of the investee.
C)vote by the Board of Directors of the investor.
D)the investor's percentage ownership of the investee's stock.
Q2) At maturity,the carrying amount of a bond should be equal to its face value.
A)True
B)False
Q3) The face interest rate of a bond determines the cash amount of interest the debtor company is expected to pay annually or semiannually.
A)True
B)False
Q4) Consolidated financial statements are prepared for the:
A)balance sheet and income statement only.
B)statement of cash flows and statement of stockholders' equity only.
C)balance sheet,income statement and statement of cash flows only.
D)balance sheet,income statement,statement of cash flows and statement of stockholders' equity.
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Chapter 14: Time Value of Money
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Sample Questions
Q1) Tanko Financing leases phones to various companies for business use.Tanko has just signed a 2-year lease agreement that requires annual year-end lease payments of $340,000.The present value of $1 for 2 periods at 5% is 0.907.The present value of an ordinary annuity of $1 for 2 periods at 5% is 1.859.What is the present value of the lease when the lease commences using a 5% interest rate?
A)$680,000
B)$340,000
C)$632,060
D)$308,380
Q2) Ordinary annuity investments provide multiple receipts of an unequal amount at fixed year-end intervals over the investment's duration.
A)True
B)False
Q3) The difference between the future value of an investment and the original investment is the amount of interest revenue that will be earned.
A)True
B)False
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Page 16