Business Fundamentals
Exam Review
Course Introduction
Business Fundamentals introduces students to the essential concepts and practices that form the foundation of the business world. Covering topics such as organizational structures, management principles, marketing, finance, operations, and entrepreneurship, this course provides a comprehensive overview of how businesses operate and succeed in dynamic environments. Students will explore real-world case studies, learn about ethical decision-making, and develop critical skills in problem-solving, communication, and teamwork that are transferable across various industries. By the end of the course, students will have a solid understanding of the major functional areas of business and be prepared to engage more deeply with advanced business topics.
Recommended Textbook
Survey of Accounting 6th Edition by Carl S. Warren
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1713 Verified Questions
1713 Flashcards
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Chapter 1: The Role of Accounting in Business
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) Assets are acquired through investing activities when resources are purchased.
A)True
B)False
Answer: True
Q2) The objective of most businesses is to maximize profits.
A)True
B)False
Answer: True
Q3) A low-cost emphasis strives to provide:
A) no-frills, standardized products and services.
B) products and services that provide unique market needs.
C) products and services that provide prestige and image for customers.
D) products and services that compete on features other than price.
Answer: A
Q4) Which of the following is considered an asset until consumed?
A) Accounts payable
B) Prepaid expense
C) Accounts receivable
D) Stockholders' equity
Answer: B
Page 3
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Chapter 2: Basic Accounting Concepts
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Sample Questions
Q1) BNC Company earns revenues and as a result collects cash. Which of the following financial statement elements increased?
A) Cash only
B) Stockholders' equity only
C) Liabilities
D) Cash and stockholders' equity
Answer: D
Q2) Any given transaction must affect at least two different parts of the accounting equation.
A)True
B)False
Answer: False
Q3) Paying expenses affects which financial statement elements?
A) Assets only
B) Stockholders' equity only
C) Assets and stockholders' equity
D) Assets and liabilities
Answer: C
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Chapter 3: Accrual Accounting Concepts
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) Accrual accounting does not require that the accounting records be updated prior to preparing financial statements.
A)True
B)False
Answer: False
Q2) The liabilities that are due to be paid usually within a year or less are called:
A) long-term liabilities.
B) deferred liabilities.
C) current liabilities.
D) contingent liabilities.
Answer: C
Q3) Updating accrual accounting records prior to preparing financial statements is called:
A) the closing process.
B) converting to cash basis accounting.
C) the adjustment process.
D) going concern adjustments.
Answer: C
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Chapter 4: Accounting for Merchandising Businesses
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138 Flashcards
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Sample Questions
Q1) Which expenses are subtracted from gross profit to arrive at income from operations?
A) All expenses
B) Cost of merchandise sold
C) Operating expenses
D) Sales discounts
Q2) Gross profit is determined by subtracting the cost of merchandise sold from what?
A) The cost of merchandise purchased
B) Fees earned
C) Accounts receivable
D) Net sales
Q3) The credit terms of a sale are normally indicated on a(n):
A) purchase order.
B) invoice.
C) bill of lading.
D) check.
Q4) The merchandise inventory account is found on the balance sheet.
A)True
B)False
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Chapter 5: Sarbanes-Oxley, Internal Control, and Cash
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) In a computerized system, paid vouchers are transferred to a paid voucher file.
A)True
B)False
Q2) The amount of deposits in transit is included on the bank statement as a(n):
A) deduction from the cash balance per books.
B) deduction from the cash balance per bank.
C) addition to the cash balance per bank.
D) addition to the cash balance per books.
Q3) A special cash fund used to make small payments that occur frequently is called a(n):
A) operating expenses fund.
B) change fund.
C) market fund.
D) petty cash fund.
Q4) The depositor reconciles the bank's statement to the depositor's records.
A)True
B)False
Q5) Explain why one person should not be permitted to purchase, receive, and pay for supplies.
Page 7
Q6) What is a special-purpose cash fund? What is its purpose? Give two examples.
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Chapter 6: Receivables and Inventories
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Sample Questions
Q1) Under the direct write-off method, an attempt is made to match Bad Debt Expense to sales revenues in the same accounting period.
A)True
B)False
Q2) The inventory data for an item for November are: \(\begin{array}{lll}
25 \text { units at } \$ 20 \text { each } & \text { Inventory } & \text { Nov. } 1 \\
30 \text { units at } \$ 21 \text { each } & \text { Purchase } & 10 \\
10 \text { units at } \$ 22 \text { each } & \text { Purchase } & 30 \\
35 \text { units } & \text { Sale } & \end{array}\) Using the first-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?
A) $640
B) $605
C) $630
D) $660
Q3) Allowance for Doubtful Accounts is a contra equity account.
A)True
B)False
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8
Chapter 7: Fixed Assets and Intangible Assets
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Sample Questions
Q1) Which of the following is not considered under the double-declining-balance method?
A) The asset's book value
B) The asset's initial cost
C) The asset's expected useful life
D) The asset's residual value
Q2) If a fixed asset with an original cost of $18,000 and accumulated depreciation of $2,000 is sold for $15,000, the company must:
A) recognize a loss on the income statement under other expenses.
B) recognize a loss on the income statement under operating expenses.
C) recognize a gain on the income statement under other revenues.
D) recognize a gain on the income statement under revenues.
Q3) The exclusive right to use a certain name or symbol is called a:
A) franchise.
B) patent.
C) trademark.
D) copyright.
Q4) Intangible assets do not exist physically.
A)True
B)False
9
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Chapter 8: Liabilities and Stockholders Equity
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Sample Questions
Q1) A current liability is a debt that is reasonably expected to be paid:
A) between 6 months and 18 months.
B) out of currently recognized revenues.
C) within one year.
D) out of cash currently on hand.
Q2) FICA tax is a payroll tax that is paid by both the employee and the employer.
A)True B)False
Q3) Based on the following information, what is earnings per share? \(\begin{array}{ll}
115,000 & \text { Common shares outstanding } \\
\$ 40,000 & \text { Preferred stock cividend declared and paid } \\
\$ 350,000 & \text { Net income } \end{array}\)
A) $3.39
B) $3.04
C) $2.96
D) $2.70
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10
Chapter 9: Financial Statement Analysis
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Sample Questions
Q1) Based on the following data for the current year, compute the inventory turnover? \(\begin{array}{ll}
\$ 500,000 & \text { Net sales on account during the year } \\ 300,000 & \text { Cost of merchandise sold during the yeat } \\
45,000 & \text { Accounts receivable, be ginning of year } \\
35,000 & \text { Accounts receivable, end of year } \\ 90,000 & \text { Inventory, be ginning of year } \\
110,000 & \text { Inventory, end of year } \end{array}\)
A) 3.0
B) 2.7
C) 4.0
D) 3.3
Q2) A company's assets are comprised of the following: Cash, $25,000; Receivables, $5,600; Marketable Securities, $7,200; and Equipment, $65,000. The total of quick assets is $37,800.
A)True
B)False
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Chapter 10: Accounting Systems for Manufacturing Businesses
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Sample Questions
Q1) If factory overhead applied is less than the actual costs, the overhead is said to be underapplied.
A)True
B)False
Q2) The recording of the jobs completed would decrease:
A) Factory Overhead.
B) Finished Goods.
C) Work-in-Process.
D) Cost of Goods Sold.
Q3) Conversion cost is the combination of direct labor cost and factory overhead cost.
A)True
B)False
Q4) The underapplied factory overhead amount may be transferred to cost of goods sold at the end of the fiscal year.
A)True
B)False
Q5) Indirect labor is included in factory overhead.
A)True B)False
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Chapter 11: Cost Behavior and Cost-Volume-Profit Analysis
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Sample Questions
Q1) Snower Corporation sells product G for $150 per unit, the variable cost per unit is $105, and the fixed costs are $720,000. What is the sales (in dollars) required to realize income from operations of $40,000?
A) $2,533,333
B) $1,773,333
C) $2,400,000
D) $1,680,000
Q2) For the purpose of analysis, mixed costs are generally:
A) classified as fixed costs.
B) classified as variable costs.
C) classified as period costs.
D) separated into their variable and fixed cost components.
Q3) If direct materials cost per unit decreases, the break-even point will increase.
A)True
B)False
Q4) Variable cost per unit remains the same regardless of activity level.
A)True
B)False
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Chapter 12: Differential Analysis and Product Pricing
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Sample Questions
Q1) Dinkins Inc. is considering disposing of a machine with a book value of $50,000 and an estimated remaining life of five years. The old machine can be sold for $15,000. A new machine with a purchase price of $150,000 is being considered as a replacement. It will have a useful life of five years and no residual value. It is estimated that variable manufacturing costs will be reduced from $70,000 to $45,000 if the new machine is purchased. The net differential increase or decrease in cost for the entire five years for the new equipment is:
A) $10,000 increase.
B) $25,000 decrease.
C) $10,000 decrease.
D) $25,000 increase.
Q2) The product with the highest contribution margin per scarce resource is the most profitable.
A)True
B)False
Q3) When eliminating a product or segment of a business, the fixed costs pertaining to the product or segment will always be eliminated.
A)True
B)False
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Chapter 13: Budgeting and Standard Cost Systems
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168 Flashcards
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Sample Questions
Q1) The budget that summarizes future plans for the acquisition of fixed assets is the:
A) direct materials purchases budget.
B) production budget.
C) sales budget.
D) capital expenditures budget.
Q2) The following data relate to direct labor costs for the current period: \(\begin{array}{lrr}
\text { 9,000 hours at \( \$ 5.50 \) } &\text {Standard costs}\\ \text {8.750 hours at \( \$ 5.25 \) } & \text {Actual costs}\\ \end{array}\)
What is the direct labor rate variance?
A) $2,250.00 unfavorable
B) $2,187.50 unfavorable
C) $2,250.00 favorable
D) $2,187.50 favorable
Q3) Currently attainable standards allow for unreasonable production difficulties.
A)True
B)False
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Chapter 14: Performance Evaluation for Decentralized Operations
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Sample Questions
Q1) Responsibility accounting reports for profit centers are normally in the form of balance sheets.
A)True
B)False
Q2) Division I of Norris Company has a rate of return on investment of 28% and a profit margin of 20%. What is the investment turnover?
A) 3.6
B) 1.4
C) 5.0
D) .7
Q3) The financial performance of responsibility centers is evaluated in the balanced scorecard under the financial section of the scorecard.
A)True
B)False
Q4) Identify the formula for the rate of return on investment.
A) Invested Assets/Income From Operations
B) Sales/Invested Assets
C) Income From Operations/Sales
D) Income From Operations/Invested Assets
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Chapter 15: Capital Investment Analysis
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Sample Questions
Q1) For years one through five, a proposed expenditure of $400,000 for a fixed asset with a 5-year life has expected net income of $50,000, $40,000, $20,000, $20,000, and $20,000, respectively, and net cash flows of $130,000, $120,000, $100,000, $100,000, and $100,000, respectively. The cash payback period is 3.5years.
A)True B)False
Q2) Average rate of return equals average investment divided by estimated average annual income.
A)True
B)False
Q3) In capital rationing, alternative proposals are initially screened by establishing minimum standards using the cash payback and the average rate of return methods. A)True B)False
Q4) Average rate of return equals estimated average annual income divided by average investment.
A)True
B)False
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