Corporate Accounting Exam Review
Course Introduction
Corporate Accounting is a comprehensive course designed to provide students with a thorough understanding of the principles, practices, and regulations that guide accounting in corporate entities. The course covers key topics such as the preparation and analysis of financial statements, accounting for share capital, debentures, dividends, and other aspects of corporate finance. Students will also explore regulatory frameworks, including accounting standards and disclosures, as well as specialized areas like amalgamation, absorption, and reconstruction of companies. Through theoretical learning and practical exercises, the course equips students with the skills necessary to interpret financial information, ensure compliance, and support effective decision-making in a corporate context.
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) From the following list of items taken from Lamar's accounting records, identify those that would appear on the income statement. (a) Rent expense
(b) Land
(c) Common stock
(d) Fees earned
(e) Dividends
(f) Wages expense
(g) Investment
Answer: (a), (d), (f)
Q2) How does the payment of rent for equipment affect the accounting equation?
A) assets increase; assets decrease
B) assets decrease; stockholders' equity decreases
C) assets decrease; liabilities increase
D) assets increase; stockholders' equity increases
Answer: B
Q3) Organized as a separate legal taxable entity
A)Proprietorship
B)Partnership
C)Corporation
Answer: C
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Chapter 2: Double-Entry Accounting
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Sample Questions
Q1) A chart of accounts is
A) the same as a balance sheet
B) usually a listing of accounts in alphabetical order
C) usually a listing of accounts in financial statement order
D) used in place of a ledger
Answer: C
Q2) Which of the following groups of accounts are increased with a debit?
A) assets, liabilities, stockholders' equity
B) assets, dividends, expenses
C) assets, revenues, expenses
D) assets, liabilities, revenues
Answer: B
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) Prepare a journal entry on October 12 for the fees earned on account, $14,600. Omit explanation.
Answer: 11ea84e6_b038_faf4_9a63_03d6a891bead_TB2281_00_TB2281_00
Page 4
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Chapter 3: Adjustments: Accruals and Deferrals
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Sample Questions
Q1) Which account would normally not require an adjusting entry?
A) Wages Expense
B) Accounts Receivable
C) Accumulated Depreciation
D) Cash Answer: D
Q2) On December 31, the balance in the office supplies account is $1,385. A physical count shows $435 worth of supplies on hand. Prepare the adjusting entry for supplies. Answer: $1,385 $435 = $950
11ea84e6_b030_20cd_9a63_719a2fe28c14_TB2281_00_TB2281_00
Q3) Which of the following is an example of accrued revenue?
A) snow removal services that have been paid for three months in advance
B) snow removal services that have been provided but have not been billed or paid
C) an agreement that has been signed for snow removal services for the next three months
D) snow removal services that have been provided and paid on the same day Answer: B
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Chapter 4: The Accounting Cycle
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Sample Questions
Q1) Utilities Expense 430 Cash 430
A)Journal entries
B)Adjusting journal entries
C)Closing journal entries
Q2) The accumulated depreciation account is closed to the income summary account. A)True B)False
Q3) There is really no benefit in preparing financial statements in any particular order.
A)True B)False
Q4) A post-closing trial balance contains only asset and liability accounts. A)True B)False
Q5) An end-of-period spreadsheet heading is dated for a period of time. A)True B)False
Q6) Explain how net income or loss is determined by using the end-of-period spreadsheets.
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Chapter 5: Accounting for Retail Businesses
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Sample Questions
Q1) Emma Co. sold to Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for $15,000. Emma Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make to record the payment for the merchandise if Isabella Co. pays within the discount period?
A) Accounts Payable-Emma Co., debit $15,000; Cash, credit $15,000
B) Accounts Payable-Emma Co., debit $15,450; Cash, credit $15,450
C) Accounts Payable-Emma Co., debit $15,000; Freight In, debit $750; Cash, credit $15,750
D) Accounts Payable-Emma Co., debit $15,750; Inventory, debit $300; Cash, credit $16,050
Q2) Prepare a statement of stockholders' equity for Fernandez Company. Additional common stock of $100,000 was issued during the year.
Q3) Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a
A) credit to Customer Refunds Payable
B) debit to Inventory
C) credit to Inventory
D) debit to Cash
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Chapter 6: Inventories
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Sample Questions
Q1) Which of the following measures the relationship between cost of goods sold and the amount of inventory carried during the period?
A) inventory turnover
B) fixed asset turnover
C) retail method of inventory costing
D) gross profit method of inventory costing
Q2) Under the _____ inventory method, accounting records maintain a continuously updated inventory value.
A) retail
B) periodic
C) physical
D) perpetual
Q3) What is the amount of cost of goods sold for the year according to the LIFO method?
A) $1,380
B) $1,375
C) $1,510
D) $1,250
Q4) List three different security measures taken to safeguard inventory.
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Page 8
Chapter 7: Internal Control and Cash
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Sample Questions
Q1) A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695. This item would be included in the bank reconciliation as a(n)
A) deduction from the balance per the company's records
B) addition to the balance per the bank statement
C) deduction from the balance per the bank statement
D) addition to the balance per the company's records
Q2) In preparing a bank reconciliation, the amount indicated by a credit memo for a note receivable collected by the bank is added to the balance per company's records. A)True
B)False
Q3) Expenditures from a petty cash fund are documented by a petty cash receipt. A)True
B)False
Q4) A check for $342 was erroneously charged by the bank as $432. In order for the bank reconciliation to balance, you must add $90 to the bank statement balance. A)True
B)False
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Chapter 8: Receivables
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Sample Questions
Q1) The balance in Allowance for Doubtful Accounts at the end of the year includes the total of all accounts written off since the beginning of the year.
A)True
B)False
Q2) If a note receivable is dishonored, what is the effect on the accounting equation?
Q3) The due date of a 60-day note dated July 10 is September 10.
A)True
B)False
Q4) Journalize the following transactions using the direct write-off method of accounting for uncollectible receivables.
April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of goods sold is $5,400.
June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.
Oct. 11 Reinstated the account of Jim Dobbs and received cash in full payment.
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Page 10
Chapter 9: Long-Term Assets: Fixed and Intangible
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Sample Questions
Q1) A gain can be realized when a fixed asset is discarded.
A)True
B)False
Q2) The difference between the balance in a fixed asset account and its related accumulated depreciation account is the asset's book value.
A)True
B)False
Q3) The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called
A) depletion
B) deferral
C) amortization
D) depreciation
Q4) Which of the following is included in the cost of land?
A) cost of paving a parking lot
B) brokerage commission
C) outdoor parking lot lighting attached to the land
D) fences on the land
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Chapter 10: Liabilities: Current, Installment Notes, and Contingencies
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Sample Questions
Q1) 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
Q2) The cost of a product warranty should be included as an expense in the
A) period the cash is collected for a product sold on account
B) future period when the cost of repairing the product is paid
C) period of the sale of the product
D) future period when the product is repaired or replaced
Q3) The discount on a note payable is charged to an account that has a normal credit balance.
A)True
B)False
Q4) Which of the following would be used to compute the federal income taxes to be withheld from an employee's earnings?
A) FICA tax rate
B) wage and tax statement
C) FUTA tax rate
D) withholding table
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Chapter 11: Liabilities: Bonds Payable
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Sample Questions
Q1) Franklin Corporation issues $50,000, 10%, 5-year bonds on January 1, for $52,100. Interest is paid semiannually on January 1 and July 1. If Franklin uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1 is
A) $10,290
B) $2,710
C) $2,500
D) $2,290
Q2) If the contract rate is less than the effective rate
A)contract rate
B)effective rate
C)bond discount
D)bond premium
E)bond
F)bond indenture
G)principal
Q3) 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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13
Chapter 12: Corporations: Organization, Stock Transactions, and Dividends
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Sample Questions
Q1) Which of the following amounts should be disclosed in the stockholders' equity section of the balance sheet?
A) the number of shares of common stock outstanding
B) the number of shares of common stock issued
C) the number of shares of common stock authorized
D) all of these
Q2) The date on which a cash dividend becomes a binding legal obligation is on the
A) declaration date
B) date of record
C) payment date
D) last day of fiscal year
Q3) A corporation has 50,000 shares of $25 par stock outstanding that has a current market value of $150 per share. If the corporation issues a 5-for-1 stock split, the market value of the stock after the split will be approximately
A) $25
B) $150
C) $5
D) $30
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) Durrand Corporation's accumulated depreciation increased by $12,000, while patents decreased by $2,200 between consecutive balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of $4,300 from sale of land. Reconcile a net income of $65,000 to net cash flow from operating activities.
Q2) In preparing the cash flows from operating activities section of the statement of cash flows by the indirect method, the net decrease in inventories from the beginning to the end of the period is added to net income for the period.
A)True
B)False
Q3) Financing activities include
A) lending money
B) acquiring investments
C) issuing debt
D) acquiring long-lived assets
Q4) Sales reported on the income statement were $690,000. The accounts receivable balance declined $39,000 over the year. Determine the amount of cash received from customers.
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Page 15
Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Corporate annual reports typically do not contain
A) management discussion and analysis
B) an SEC statement expressing an opinion
C) accompanying notes
D) an auditor's report
Q2) A loss on disposal of a segment would be reported in the income statement as a(n)
A) administrative expense
B) other expense
C) deduction from income from continuing operations
D) selling expense
Q3) In the vertical analysis of an income statement, each item is generally stated as a percentage of total assets.
A)True
B)False
Q4) Solvency analysis focuses on the ability of a business to pay its current and noncurrent liabilities.
A)True
B)False
Q5) Define solvency and profitability. How are they alike?
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Chapter 15:Investments
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Sample Questions
Q1) On May 1, Cedar Inc. purchases $150,000 of 10-year, Knox Corporation 8% bonds dated March 1 at 100 plus accrued interest. What entry would Cedar record when receiving its semiannual interest on March 1?
Q2) Blanton Corporation purchased 35% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives from Worton Corporation?
A) debit Investment in Worton Corporation Stock; credit Cash
B) debit Cash; credit Dividend Revenue
C) debit Investment in Worton Corporation Stock; credit Income of Worton Corporation
D) debit Cash; credit Investment in Worton Corporation Stock
Q3) On January 2, Todd Company acquired 40% of the outstanding stock of McGuire Company for $205,000. For the year ending December 31. McGuire earned income of $48,000 and paid dividends of $14,000.
Prepare the entries for Todd Company for the purchase of the stock, share of McGuire income, and dividends received from McGuire.
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