Business Accounting Review
Questions
Course Introduction
Business Accounting is a foundational course that introduces students to the principles and practices of accounting within a business context. The course covers essential topics such as the accounting cycle, preparation of financial statements, and the analysis and interpretation of financial data. Students will learn about double-entry bookkeeping, internal controls, and the role of accounting in decision-making. Emphasis is placed on understanding the regulatory environment, ethical considerations, and the use of accounting information for planning, controlling, and evaluating business operations. This course equips students with the practical skills needed to record, report, and analyze financial transactions, serving as a basis for more advanced study in accounting and finance.
Recommended Textbook
Corporate Financial Accounting 15th Edition by Carl S. Warren
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Page 2
Chapter 1: Accounting and Business
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Sample Questions
Q1) No significant differences exist between the accounting standards issued by the FASB and the IASB.
A)True
B)False
Answer: False
Q2) An income statement is a summary of the revenues and expenses of a business as of a specific date.
A)True
B)False
Answer: False
Q3) If total assets decreased by $30,000 during a specific period and stockholders' equity decreased by $35,000 during the same period, the period's change in total liabilities was a $65,000 increase.
A)True
B)False
Answer: False
Q4) About 90% of the businesses in the United States are organized as corporations.
A)True
B)False
Answer: False
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Chapter 2: Double-Entry Accounting
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Sample Questions
Q1) The right side of a T account is known as a debit and the left side is known as a credit.
A)True
B)False
Answer: False
Q2) A credit to the cash account will increase the account.
A)True
B)False Answer: False
Q3) For a month's transactions for a typical medium-sized business, the accounts payable account is likely to have only credit entries.
A)True
B)False
Answer: False
Q4) Depending on the account title, the right side of the account is referred to as the credit side.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Adjustments: Accruals and Deferrals
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Sample Questions
Q1) Fees payable would appear on the balance sheet as a(n)
A) asset
B) liability
C) fixed asset
D) unearned revenue
Answer: B
Q2) Adjusting journal entries are dated on the last day of the period.
A)True
B)False
Answer: True
Q3) Accrued salaries of $600 owed to employees for December 29, 30, and 31 are not taken into consideration in preparing the financial statements for the year ended December 31. Indicate which items will be erroneously stated, because of the error, on (a) the income statement for the year and (b) the balance sheet as of December 31. Also indicate whether the items in error will be overstated or understated.
Answer: 11ea84e6_b031_a790_9a63_65f0b88beb04_TB2281_00_TB2281_00
Q4) The estimated amount of depreciation on equipment for the current year is $5,300.
Journalize the adjusting entry to record the depreciation.
Answer: 11ea84e6_b030_9606_9a63_0f1e4eb5bbc3_TB2281_00_TB2281_00
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Chapter 4: The Accounting Cycle
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Sample Questions
Q1) After net income is entered on the end-of-period spreadsheet, the Balance Sheet Debit and Credit columns must
A) be the same amount as the total amount of the Income Statement Debit and Credit columns
B) equal each other
C) be the same amount as the total amount in the Adjusted Trial Balance Debit and Credit columns
D) not be equal to each other and need not be the same total amounts as any other pair of columns on the end-of-period spreadsheet
Q2) Closing entries are entered directly on the end-of-period spreadsheet. A)True B)False
Q3) Entries required to close the balances of the temporary accounts at the end of the period are called final entries. A)True B)False
Q4) Explain how net income or loss is determined by using the end-of-period spreadsheets.
Q5) Describe a classified balance sheet.
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Chapter 5: Accounting for Retail Businesses
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Sample Questions
Q1) Assume that the total inventory on hand at the end of the year as determined by taking a physical inventory is $62,000. Of the $62,000, $8,000 has been sold FOB destination and is awaiting pickup by the carrier. What is the cost of inventory reported on the balance sheet?
A) $70,000
B) $62,000
C) $58,000
D) $54,000
Q2) When a merchandising business is compared to a service business, the financial statement that is not affected by that change is the statement of stockholders' equity. A)True
B)False
Q3) In a perpetual inventory system, merchandise returned to vendors reduces the inventory account.
A)True
B)False
Q4) Prepare a balance sheet for Fernandez Company assuming the current portion of the notes payable is $30,000.
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Chapter 6: Inventories
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Sample Questions
Q1) The inventory data for an item for November are: \[\begin{array} { r l l }
\text { Nov. } 1 & \text { Inventory } & 20 \text { units at } \$ 19 \\
4 & \text { Sold } & 10 \text { units } \\
10 & \text { Purchased } & 30 \text { units at } \$ 20 \\
17 & \text { Sold } & 20 \text { units } \\
30 & \text { Purchased } & 10 \text { units at } \$ 21 \end{array}\] Using a perpetual system, what is the cost of the goods sold for November if the company uses LIFO?
A) $610
B) $600
C) $590
D) $580
Q2) When using the FIFO inventory costing method, the most recent costs are assigned to the cost of goods sold.
A)True
B)False
Q3) During August, the first month of the fiscal year, sales totaled $875,000 and the cost of merchandise available for sale totaled $850,000. Estimate the cost of the inventory as of August 31, based on an estimated gross profit rate of 45%.
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Page 8
Chapter 7: Internal Control and Cash
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Sample Questions
Q1) Stephanie Jo Company established a petty cash fund of $300 on May 1. At the end of the month, the petty cash fund has $42 in cash and receipts for postage, $39; entertainment, $146; and office supplies of $70.
Prepare the needed journal entries, recording any discrepancy in the cash short and over account.
\[\begin{array} { | c | c | c | c | c | }
\hline && { \text { Journal } } \\
\hline \text { Date } & \text { Description } & \text { Post. Ref. } & \text { Debit } & \text { Credit } \\
\hline & & & & \\
\hline & & & & \\
\hline & & & & \\
\hline & & & & \\
\hline & & & & \\
\hline & & & & \\
\hline & & & & \\
\hline
\end{array}\]
Q2) List and define each of the five elements of internal control.
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Page 9
Chapter 8: Receivables
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Sample Questions
Q1) A company uses the allowance method to account for uncollectible accounts receivable. When the firm writes off a specific customer's account receivable
A) total current assets are reduced
B) total expenses for the period are increased
C) net realizable value of accounts receivable increases
D) there is no effect on total current assets or total expenses
Q2) Roe's Renovations utilizes the direct write-off method of accounting for uncollectible receivables. On September 15 the company is notified by the attorneys for Jacob Marley that Jacob Marley is bankrupt and no cash is expected in the liquidation. Write off the $675 of accounts receivable due from Jacob Marley.
Q3) When the allowance method for accounting for uncollectible receivables is used, net income is reduced when a specific receivable is written off.
A)True
B)False
Q4) The accounts receivable turnover measures the length of time in days it takes to collect a receivable.
A)True
B)False
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Page 10
Chapter 9: Long-Term Assets: Fixed and Intangible
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Sample Questions
Q1) Nike swoosh
A)Patent
B)Copyright
C)Trademark
D)Goodwill
Q2) Revising depreciation estimates affects the amounts of depreciation expense recorded in past periods.
A)True
B)False
Q3) Costs to survey a new piece of land for a new business location
A)Buildings
B)Machinery and equipment
C)Land
D)Land improvements
Q4) Sales taxes paid on new factory equipment
A)Buildings
B)Machinery and equipment
C)Land
D)Land improvements
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Chapter 10: Liabilities: Current, Installment Notes, and Contingencies
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Sample Questions
Q1) Each year there is a ceiling for the amount that is subject to all of the following except
A) social security tax
B) federal income tax
C) federal unemployment tax
D) state unemployment tax
Q2) Which of the following will have no effect on an employee's take-home pay?
A) social security tax
B) unemployment tax
C) marital status
D) number of exemptions claimed
Q3) Martin Jackson receives an hourly wage rate of $30, with time and a half for all hours worked in excess of 40 hours during a week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $350; social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the net amount to be paid to Jackson?
A) $1,470.00
B) $1,009.75
C) $1,097.95
D) $460.25
Page 12
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Chapter 11: Liabilities: Bonds Payable
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Sample Questions
Q1) 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
Q2) If the contract rate exceeds the effective rate
A)contract rate
B)effective rate
C)bond discount
D)bond premium
E)bond
F)bond indenture
G)principal
Q3) If the straight-line method of amortization of discount on bonds payable is used, the amount of yearly interest expense will increase as the bonds approach maturity.
A)True
B)False
Q4) A $500,000 bond issue on which there is an unamortized discount of $20,000 is redeemed for $475,000. Journalize the redemption of the bonds.
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Chapter 12: Corporations: Organization, Stock Transactions, and Dividends
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Sample Questions
Q1) What is the total stockholders' equity based on the following account balances
\[\begin{array} { l r }
\text { Common Stock } & \$ 375,000 \\
\text { Paid-In Capital in Excess of Par } & 90,000 \\
\text { Retained Earnings } & 190,000 \\
\text { Treasury Stock } & 15,000
\end{array}\]
A) $670,000
B) $655,000
C) $640,000
D) $565,000
Q2) On February 13, Epperson Company issue for cash 75,000 shares of no-par common stock (with a stated value of $125) at $140. On September 9, Epperson issued at par 15,000 shares of 1%, $60 par preferred stock at par for cash. On November 23, Epperson issued for cash 8,000 shares of 1%, $60 par preferred stock at $70.
Journalize the entries to record the February 13, September 9, and November 23 transactions.
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) In determining the cash flows from operating activities for the statement of cash flows by the indirect method, the depreciation expense for the period is added to the net income for the period.
A)True
B)False
Q2) If land costing $145,000 was sold for $205,000, the $60,000 gain on the sale would be added to net income in the operating activities section of the statement of cash flows (prepared by the indirect method).
A)True
B)False
Q3) Purchase of the stock of another company as investment
A)Operating activities
B)Financing activities
C)Investing activities
D)Schedule of noncash financing and investing
Q4) To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.
A)True
B)False
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Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) If a firm has a quick ratio of 1, the subsequent payment of an account payable will cause the ratio to increase.
A)True
B)False
Q2) An advantage of the current ratio is that it considers the makeup of the current assets.
A)True
B)False
Q3) When you are interpreting financial ratios, it is useful to compare a company's ratios to the same ratios from a prior period or to the ratios of another company in the same industry.
A)True
B)False
Q4) Unusual items affecting the prior period's income statement consist of changes in or errors in applying accounting principles.
A)True
B)False
Q5) What is a major advantage of using percentages rather than dollar changes in doing horizontal and vertical analysis?
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Chapter 15:Investments
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Sample Questions
Q1) The financial statements resulting from combining parent and subsidiary statements are called consolidated statements.
A)True
B)False
Q2) What are the total proceeds from the February 1 sale?
A) $52,400
B) $51,500
C) $50,000
D) $52,000
Q3) Gale Company owns 87% of the outstanding stock of Leonardo Company. Leonardo Company is referred to as the
A) parent
B) minority interest
C) affiliate
D) subsidiary
Q4) Investments in stocks that are expected to be held for the long term are listed in the stockholder's equity section of the balance sheet.
A)True
B)False
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