Business Accounting
Solved Exam Questions
Course Introduction
Business Accounting provides students with a comprehensive introduction to the fundamental concepts and principles of accounting as they apply to business organizations. The course covers essential topics such as the accounting cycle, preparation and analysis of financial statements, recording and reporting of business transactions, and the role of accounting information in decision-making. Emphasis is placed on understanding how financial data are used to assess company performance and support strategic planning. Through practical exercises and case studies, students will develop the skills necessary to interpret financial reports, adhere to ethical accounting practices, and utilize accounting tools to inform business decisions.
Recommended Textbook
Financial Accounting 11th Edition by
W. Steve Albrecht
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24 Chapters
2549 Verified Questions
2549 Flashcards
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Page 2
Chapter 1: Accounting Information: Users and Uses
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Sample Questions
Q1) The primary internal group that uses accounting information is
A) Government agencies
B) Investors
C) Management
D) Competitors
Answer: C
Q2) Which of the following is NOT a key component of the definition of accounting?
A) Financial
B) Qualitative
C) Useful
D) Decision-oriented
Answer: B
Q3) Which of the following financial statements reports the excess of a company's revenues over its expenses?
A) Balance sheet
B) Income statement
C) Statement of retained earnings
D) Statement of cash flows
Answer: B
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Page 3
Chapter 2: Financial Statements: An Overview
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Sample Questions
Q1) During the year, Rigby Corporation earned revenues of $114,000 and incurred $98,000 for various operating expenses. There are 1,280 shares of stock outstanding. Earnings per share is
A) $12.80
B) $12.50
C) $8.80
D) $8.50
Answer: B
Q2) The idea that an increase or decrease on one side of the accounting equation must be offset exactly by an increase or decrease on the other side of the accounting equation is called
A) Additive concept
B) Going concern assumption
C) Monetary measurement concept
D) Double-entry accounting
Answer: D
Q3) List the three categories of the balance sheet. For each category, provide the definition and examples of two types of accounts that are found in that particular category.
Answer: 11ea6d11_7034_042f_b460_6b415cc5240b_TB1384_00
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Chapter 3: The Accounting Cycle: The Mechanics of Accounting
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Sample Questions
Q1) Which of the following is NOT a reason that business documents are used in a business?
A) To confirm that a transaction has occurred
B) To facilitate the analysis of business transactions
C) To forecast sales
D) To establish the amounts to be recorded
Answer: C
Q2) Which of the following accounts is decreased with a debit?
A) Rent Expense
B) Retained Earnings
C) Equipment
D) Accounts Receivable
Answer: B
Q3) The purchase of supplies on account
A) Increases assets and decreases liabilities
B) Decreases assets and increases liabilities
C) Increases assets and increases liabilities
D) Decreases assets and decreases liabilities
Answer: C
Page 5
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) During 2013, Rumbo Corporation had cash and credit sales of $21,760 and $15,225, respectively. The company also collected accounts receivable of $9,765 and incurred operating expenses of $27,700, 80 percent of which were paid during the year. In addition, Rumbo paid $4,500 for an 18-month advertising campaign that began on September 30. Rumbo's accrual-basis net income (loss) for 2009 was
A) $9,285
B) $8,535
C) $14,075
D) $(775)
Q2) The audit procedures conducted by the external auditor include all of the following, EXCEPT
A) Review of adjustments
B) Review of accounting systems
C) Sample of financial ratios
D) Sample of selected accounts
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6
Chapter 5: Internal Controls: Ensuring the Integrity of Financial Information
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Sample Questions
Q1) Which of the following activities would internal auditors NOT typically perform in a large company?
A) Evaluate internal controls
B) Assist with increasing the efficiency of operations
C) Prepare the primary financial statements
D) Detect fraud
Q2) Restoring public confidence in the financial reporting process requires that auditors remain independent. How does the Sarbanes-Oxley Act constrain auditors to ensure independence?
Q3) If two different accountants were to estimate the percentage of customers who will NOT pay their accounts (bad debts), they could arrive at different estimates. These differing estimates would affect the financial statements. Such differences in assessing estimates are due to
A) Fraudulent financial reporting
B) Errors in accounts and ledgers
C) Disagreements in judgment
D) Lack of internal controls
Q4) List and discuss three motivations for independent auditors to fairly represent the financial information of the company.
7
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Chapter 6: Receivables: Selling a Product or a Service
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Sample Questions
Q1) A U.S. company makes a sale to a Brazilian company for 10,000 reais on March 15. The Brazilian company will pay on May 1. The exchange rate on March 15 is 1 real = $0.529 and on May 1 is 1 real = $0.480. The average rate was 1 real = $0.505. The U.S. company will record a foreign currency gain (loss) of
A) $0
B) ($490)
C) ($240)
D) $490
Q2) Which of these is NOT one of the most common reasons for differences between the bank cash balance and the book cash balance?
A) Accounting errors
B) Deposits in transit
C) Time period differences
D) All of these are common reasons
Q3) Which of the following accounts would normally be found on the income statement?
A) Unearned Service Revenues
B) Rent Payable
C) Sales Returns and Allowances
D) Cash
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Page 8
Chapter 7: Inventory and the Cost of Sales
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Sample Questions
Q1) Inventory is usually carried in the accounting records at
A) Lower of cost or market
B) Market
C) Cost
D) Selling price
Q2) A perpetual inventory system is most often used when
A) Inventory has a small number of items with relatively high value
B) Inventory has a small number of items with relatively low value
C) Inventory has a large number of items with relatively low value
D) Inventory has a large number of items with relatively high value
Q3) Which of the following is an inventory account for a retailer?
A) Raw Materials
B) Work In Process
C) Finished Goods
D) Merchandise
Q4) Which of the following accounts would be found on the income statement?
A) Inventory
B) Wages Payable
C) Freight-In
D) Cash
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Chapter 8: Completing the Operating Cycle
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Sample Questions
Q1) Which of the following is NOT true about a defined contribution plan?
A) No balance sheet liability is reported in connection with the defined contribution plan.
B) Upon retirement, the employee will receive all the money contributed to the pension fund along with the earnings of those contributions
C) The amount distributed in the defined contribution plan is dependent upon various factors such as salary increases, employee turnover, and employee life span.
D) Each year a company reports a pension expense of the amount contributed to the employees' pensions.
Q2) Earnings per share is equal to
A) Total revenues divided by total shares of capital stock
B) Net income divided by total shares of capital stock
C) Total expenses divided by total shares of capital stock
D) Net income divided by retained earnings
Q3) Accounting rules give specific instructions on whether to expense or capitalize research and development costs and advertising costs. List the rules associated with these two costs.
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Chapter 9: Investments: Property, Plant, and Equipment and Intangible Assets
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Sample Questions
Q1) Which of the following is NOT a current asset?
A) Marketable Securities
B) Cash
C) Accounts Receivable
D) Property, Plant, and Equipment
Q2) Rapid Deliveries purchased a delivery truck on July 1, 2012, at a cost of $16,800. The truck has an estimated useful life of 4 years or 40,000 miles and a salvage value of $1,200. The depreciation expense for the year ending December 31, 2012, under the straight-line depreciation method would be
A) $1,950
B) $1,352
C) $3,900
D) $1,092
Q3) If a truck's engine is overhauled for $8,000, the journal entry would normally include a debit to
A) Truck
B) Notes Payable
C) Depreciation
D) Cash
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Chapter 10: Financing: Long-Term Liabilities
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Sample Questions
Q1) Riverview County issued a $500,000, 10 percent, 10-year bond on January 1, 2012, for 113.6 when the effective interest rate was 8 percent. Interest is payable on June 30 and December 31. Riverview uses the effective-interest method to amortize all premiums and discounts. How much premium or discount should be amortized on June 30, 2012?
A) $2,790
B) $2,280
C) $2,000
D) $1,970
Q2) Assume you are going to purchase a house. You have $40,000 to use as a down payment and can afford a payment of $16,000 per year for 30 years. If interest is 8 percent per year, what is the largest purchase price of the house that you can buy?
A) $20,795
B) $225,156
C) $260,000
D) $220,125
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Chapter 11: Financing: Equity
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Sample Questions
Q1) Which of the following types of business organization is owned by one person?
A) Corporation
B) Partnership
C) Proprietorship
D) Corporation, partnership, and proprietorship
Q2) Compared with preferred stock, common stock usually has a favorable preference in terms of
A) Dividends
B) Voting rights
C) Liquidated assets
D) Resale value
Q3) Which of the following types of business organization is easy to start and easy to terminate?
A) Proprietorship
B) Partnership
C) Corporation
D) Only proprietorship and partnership
Q4) Identify the two types of stock that are sold by a corporation and list the characteristics of each one.
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Chapter 12: Investments: Debt and Equity Securities
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Sample Questions
Q1) On January 5, 2012, Gannon Corporation purchased 100 shares of Hedney Company stock at $12 per share and paid a $50 brokerage commission. Gannon classified the shares as available-for-sale securities. On May 31, 2012, the entry to record the receipt of the 60-cent-per-share dividend would include a credit to
A) Dividend Revenue for $100
B) Long-Term Investments for $60
C) Dividend Revenue for $60
D) Long-Term Investments for $100
Q2) Financial statements in which financial data for two or more companies are combined as a single entity are called
A) Conventional statements
B) Consolidated statements
C) Audited statements
D) Constitutional statements
Q3) If a trading security is sold, the investment account is
A) Debited for the market value of the security
B) Credited for the cost of the security
C) Credited for the market value of the security
D) Debited for the cost of the security
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Page 14
Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) Which of the following would be deducted from net income on a statement of cash flows prepared using the indirect method?
A) A gain from the sale of equipment
B) A decrease in accounts receivable
C) An increase in accounts payable
D) Dividends paid
Q2) Refer to Exhibit 13-4. Given the information above, cash collected from customers is
A) $98,000
B) $100,000
C) $102,000
D) $122,000
Q3) Which of the following would be classified as an investing activity on a statement of cash flows?
A) Cash received from dividends
B) Cash paid for interest
C) Cash received from the sale of a land
D) Cash used to repay principal amounts borrowed
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15
Chapter 14: Analyzing Financial Statements
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Sample Questions
Q1) Refer to Exhibit 14-7. Compute the cash flow-to-net income ratio.
A) 2.57
B) 4.09
C) 16.36
D) 2.12
Q2) The particular analytical measures chosen to analyze a company may be influenced by all BUT which one of the following?
A) Industry type
B) Capital structure
C) Diversity of business operations
D) Product quality or service effectiveness
Q3) When analyzing a company's debt-to-equity ratio, if the ratio has a value that is greater then one, then the company has
A) Less debt than equity
B) More debt than equity
C) Equal amounts of debt and equity
D) None of these are correct
Q4) List five efficiency ratios and write out the equation for each one.
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Chapter 15: Management Accounting and Cost Concepts
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Sample Questions
Q1) Costs that are directly traceable to a unit of business or segment being analyzed are called:
A) Direct costs
B) Sunk costs
C) Variable costs
D) Overhead costs
Q2) Which one of the following is NOT an ethical guideline that the Institute of Management Accountants (IMA) requires its members to follow?
A) Not disclose confidential information
B) Maintain objectivity when communicating information to decision makers
C) Act with both actual and apparent integrity in all situations
D) All of these are correct
Q3) The aspect of management accounting that deals with such issues as what additional major resources (e.g., plant and equipment) are needed to meet a company's long-run goals is called:
A) Capital budgeting
B) Production prioritizing
C) Operational budgeting
D) Strategic planning
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Page 17
Chapter 16: Cost Flows and Business Organizations
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Sample Questions
Q1) If direct labor time is charged to the wrong job number, that job will:
A) Appear more profitable than it should
B) Appear less profitable than it should
C) Report the correct profitability
D) None of these are correct
Q2) In production, 100 units in a process that are 30% complete are referred to as:
A) 30 equivalent units of production
B) 70 equivalent units of production
C) 100 equivalent units of production
D) 130 equivalent units of production
Q3) A company that produces expensive customized machines would probably use which of the following methods of product costing?
A) Job order costing
B) Process costing
C) Marginal costing
D) Some combination of job order costing and process costing
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Chapter 17: Activity-Based Costing
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Sample Questions
Q1) The allocation of which of the following can cause the greatest errors when computing product costs?
A) Direct labor
B) Manufacturing overhead
C) Direct materials
D) All of these are correct
Q2) Assume that direct labor and direct materials are the major cost components of a product and that the small amount of overhead cost can easily be associated with products using a simple overhead allocation basis such as direct labor hours. Which one of the following statements is the most correct?
A) Activity-based costing should probably be used in this situation.
B) Activity-based costing is probably too expensive to justify using it in this situation.
C) Job order costing is probably too expensive to justify using it in this situation.
D) None of these are correct
Q3) Define activity-based costing and list the five steps in implementing and using an activity-based costing system.
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19
Chapter 18: Budgeting and Control
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Sample Questions
Q1) Which of the following budgets is based on the expected sales volume and the desired ending inventory of finished goods and is adjusted for the expected beginning inventory of finished goods?
A) Sales budget
B) Production budget
C) Direct materials budget
D) Budgeted product cost sheet
Q2) Refer to Exhibit 18-3. Given the information above, budgeted production for December is:
A) 97 gallons
B) 115 gallons
C) 142 gallons
D) 178 gallons
Q3) Which budget supplies information for all manufacturing cost budgets?
A) Cash
B) Production
C) Master
D) Direct materials purchases
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Chapter 19: Controlling Cost and Profit
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Sample Questions
Q1) Managers with the most costs to control are found:
A) At the lowest level
B) At the middle level
C) At the highest level
D) Not enough information available
Q2) Refer to Exhibit 19-3. Given the information above, the actual labor hours were:
A) 356,040 hours
B) 357,300 hours
C) 362,700 hours
D) 360,000 hours
Q3) Refer to Exhibit 19-2. Based on the information above, the number of direct labor hours that should have been used is:
A) 5,900 hours
B) 6,000 hours
C) 6,100 hours
D) 6,200 hours
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Chapter 20: Inventory Management and Variable and
Absorption Costing
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Sample Questions
Q1) The consulting firm of Howe and Biggs is currently conducting a large consulting assignment for Spaeth Industries. Howe has calculated that the financial holding costs of this 3-month project are $6,000. If the project will use $600,000 in supplies, labor, and overhead, Howe's cost of capital must be:
A) 4%
B) 8%
C) 12%
D) None of these
Q2) The private investigation firm of Watson & Holmes is conducting an investigation for a wealthy movie star. The investigation is estimated to take 6 months to complete and will use $2,000 in supplies, $120,000 in labor, and $80,000 in overhead. Watson & Holmes' cost of capital is 12%. What are the financial holding costs on this project?
A) $0
B) $3,030
C) $6,060
D) $12,120
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Chapter 21: Cost Behavior and Decisions Using C-V-P Analysis
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Sample Questions
Q1) Given the equation $500X = $300X + $200,000, variable costs are:
A) $300 per unit
B) $200 per unit
C) $200,000
D) Represented by X
Q2) The scattergraph method is used to analyze:
A) Variable costs
B) Mixed costs
C) Fixed costs
D) Relevant costs
Q3) Refer to Exhibit 21-5. How many units of its product will Duncan Corporation have to sell to break even?
A) 116
B) 194
C) 290
D) 300
Q4) Last month CMC Corporation had to sell 6,000 units to reach the break- even point. The selling price was $225 per unit and variable costs were $85.50 per unit. What were fixed costs for the month?
To
Chapter 22: Relevant Information and Decisions
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Sample Questions
Q1) Overland Company is planning on discontinuing one of its markets in Japan. The Japanese market has a contribution margin of $33,000. Fixed costs for the Japanese market are $55,000, 70% of which are unavoidable. What will be the effect on Overland's net income if the Japanese market is eliminated?
A) Increase by $33,000
B) Decrease by $33,000
C) Increase by $16,500
D) Decrease by $16,500
Q2) When considering whether or not to drop a market segment of a business, past costs that CANNOT be recovered regardless of whether the segment is dropped are:
A) Opportunity costs
B) Variable costs
C) Sunk costs
D) Relevant costs
Q3) Make-or-buy decisions should be based on:
A) Total costs
B) Only variable costs
C) Variable costs and indirect fixed costs
D) Variable costs and direct fixed costs
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Page 24
Chapter 23: Capital Investment Decisions
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Sample Questions
Q1) Which of the following is LEAST preferable for measuring profitability of an investment?
A) Internal rate of return method
B) Payback method
C) Net present value method
D) Unadjusted rate of return method
Q2) Linex Corporation is considering the purchase of a new machine that costs $18,000, has an expected useful life of 10 years, and has no salvage value. Linex estimates that the machine will save the company $3,000 per year over the 10-year life. The company's hurdle rate is 12%. The present value annuity factors of 10, 12, and 14% for 10 years are 6.145, 5.650, and 5.216, respectively. The present value of $1 discounted for 10 years at 12% is 0.322. Given the data provided, the internal rate of return on the machine is:
A) Less than 10%
B) Between 10% and 12%
C) Between 12% and 14%
D) Greater than 14%
Q3) List and describe the three aspects of capital investment decisions that are critical to long-run profitability.
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Chapter 24: New Measures of Performance
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Sample Questions
Q1) Costs incurred to handle customer complaints are:
A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs
Q2) The just-in-time inventory system focus is:
A) A low cost supplier
B) State of the art, high technology equipment
C) Multiskilled workers
D) Waste elimination
Q3) Organizations using just-in-time:
A) Must obtain material only when needed for production
B) Must manufacture quality into the products
C) Must keep inventories at a minimum
D) All of these are correct
Q4) Which of the following is a measure of learning and growth in an organization?
A) Employee satisfaction
B) Productivity
C) Employee retention
D) All of these are correct
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