Financial Accounting Test
Bank
Course Introduction
Financial Accounting introduces students to the fundamental principles and practices of accounting in a business context. This course covers the preparation, analysis, and interpretation of financial statements, including the balance sheet, income statement, and statement of cash flows. Students learn how to record financial transactions, apply accounting standards, and utilize financial information for decision-making purposes. Emphasis is placed on understanding the conceptual framework of accounting, ethical considerations, and the regulatory environment. By the end of the course, students will be equipped with the skills necessary to assess an organizations financial health and communicate financial information effectively to stakeholders.
Recommended Textbook Survey of Accounting 5th Edition by Carl S. Warren
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15 Chapters 1711 Verified Questions 1711 Flashcards
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Chapter 1: The Role of Accounting in Business
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94 Flashcards
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Sample Questions
Q1) The objective of most businesses is to maximize profits.
A)True
B)False
Answer: True
Q2) Define accounting and its role in business.
Answer: Accounting provides information for managers to use in operating the business.Accounting provides information to external stakeholders to use in assessing the economic performance and condition of the business.
Q3) Which of the following would NOT be an example of a merchandising business?
A)Ford Motor Company
B)Safeway
C)Barnes & Noble
D)Starbucks
Answer: A
Q4) A partnership is owned by two or more individuals.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Basic Accounting Concepts
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Sample Questions
Q1) Johnson,Inc.purchased land for cash.What effect does this transaction have on the following accounts:
A)Increase in Cash and decrease in Land
B)Decrease in Cash and decrease in Land
C)Increase in Cash and increase in Land
D)Decrease in Cash and increase in Land
Answer: D
Q2) If a $15,000 purchase of equipment for cash is incorrectly recorded as an increase to equipment and as an increase to cash,at the end of the period assets will
A)exceed liabilities and stockholders' equity by $15,000.
B)equal liabilities and stockholders' equity.
C)exceed liabilities and stockholders' equity by $30,000.
D)exceed liabilities and stockholders' equity by $40,000.
Answer: C
Q3) When an account receivable is collected in cash,the total assets of the business increase.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Accrual Accounting Concepts
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Sample Questions
Q1) Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in
A)the cash flows from financing activities section.
B)the cash flows from investing activities section.
C)a separate schedule.
D)the cash flows from operating activities section.
Answer: D
Q2) The balance in the office supplies account on June 1 was $5,200,supplies purchased during June were $2,500,and the supplies on hand at June 30 were $1,500.The amount to be used for the appropriate adjusting entry is
A)$6,700.
B)$2,500.
C)$9,200.
D)$6,200.
Answer: D
Q3) Physical assets of a long-term nature are referred to as fixed assets.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Accounting for Merchandising Businesses
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142 Flashcards
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Sample Questions
Q1) Since merchandise inventory is normally sold within a year,how is it reported on the balance sheet?
A)As a revenue
B)As the cost of merchandise sold
C)It does not appear on the Balance Sheet
D)As a current asset
Q2) In a transaction where purchased merchandise has been returned,the buyer will increase the Sales Returns and Allowances account and the seller will increase the Purchases Returns and Allowances account.
A)True
B)False
Q3) In recording the cost of merchandise sold for cash using a perpetual inventory system,the effect on the accounts is
A)increase Cost of Merchandise Sold;increase Sales.
B)increase Cost of Merchandise Sold;decrease Merchandise Inventory.
C)increase Merchandise Inventory;decrease Cost of Merchandise Sold.
D)increase Accounts Receivable;decrease Merchandise Inventory.
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Chapter 5: Sarbanes-Oxley,internal Control,and Cash
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Sample Questions
Q1) Management's philosophy and operating style would affect which of the following elements of internal control?
A)Risk assessment
B)Monitoring
C)The control environment
D)Information and communication
Q2) All organizations face risks,and the assessment of these risks is necessary so that the objectives of internal control can be achieved.
A)True
B)False
Q3) Outstanding checks are checks that have been issued but have NOT cleared the bank.
A)True
B)False
Q4) A voucher is a written authorization to make a cash payment.
A)True
B)False
Q5) What is the purpose of the Sarbanes-Oxley Act of 2002,and why was it enacted?
Q6) Why would a bank require a company to maintain a compensating balance?
Page 7
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Chapter 6: Receivables and Inventories
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Sample Questions
Q1) The due date of a 90-day note dated July 5 is
A)September 30.
B)October 2.
C)October 3.
D)October 1.
Q2) Receivables not expected to be collected within one year are reported in the fixed assets section of the balance sheet.
A)True
B)False
Q3) Receivables are usually a significant portion of
A)total current liabilities.
B)total liabilities.
C)total current assets.
D)total assets.
Q4) The balance of the allowance for doubtful accounts is deducted from accounts receivable on the balance sheet.
A)True
B)False
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Page 8
Chapter 7: Fixed Assets and Intangible Assets
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Sample Questions
Q1) Expenditures made to extend an asset's life are deemed revenue expenditures.
A)True
B)False
Q2) Which of the following should be included in the acquisition cost of a piece of equipment?
A)Transportation costs
B)Installation costs
C)Testing costs prior to placing the equipment into production
D)All of these
Q3) A company acquired some land for $80,000 to construct a new office complex.Legal fees paid were $2,300,delinquent taxes assumed were $3,400,and $5,850 was paid to remove an old building from which salvaged materials sold for $1,950.What is the cost basis for the land?
A)$93,500
B)$91,550
C)$85,700
D)$89,600
Q4) Fixed assets may be shown at book value on the balance sheet.
A)True
B)False
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Chapter 8: Liabilities and Stockholders Equity
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Sample Questions
Q1) In which section of the balance sheet would treasury stock be reported?
A)Fixed assets
B)Long-term liabilities
C)Stockholders' equity
D)Intangible assets
Q2) On April 1,10,000 shares of $20 par common stock were issued at $24.Illustrate the effects on the accounts and the financial statements.
Q3) Federal unemployment compensation tax becomes an employer's liability at the time the employee is paid.
A)True
B)False
Q4) A bond indenture is
A)a contract between the corporation issuing the bonds and the underwriters selling the bonds.
B)the amount due at the maturity date of the bonds.
C)a contract between the corporation issuing the bonds and the bondholders.
D)the amount for which the corporation can buy back the bonds prior to the maturity date.
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Chapter 9: Financial Statement Analysis
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Sample Questions
Q1) The ratio of the market price per share of common stock on a specific date to the annual earnings per share is referred to as the price-earnings ratio.
A)True
B)False
Q2) A company with $60,000 in current assets and $40,000 in current liabilities pays a $1,000 current liability.As a result of this transaction,the current ratio and working capital will
A)both decrease.
B)both increase.
C)increase and remain the same,respectively.
D)remain the same and decrease,respectively.
Q3) The percentage analysis of increases and decreases in individual items in comparative financial statements is called
A)vertical analysis.
B)solvency analysis.
C)profitability analysis.
D)horizontal analysis.
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Chapter 10: Accounting Systems for Manufacturing
Businesses
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) Job order cost systems can be used to compare unit costs of similar jobs to determine if costs are staying within expected ranges.
A)True
B)False
Q2) In a job order cost accounting system for a service business,materials costs are normally included as part of overhead.
A)True
B)False
Q3) A difference in quantity of materials used on two comparable jobs may be caused by
A)inadequately trained employees.
B)poor quality materials.
C)employee carelessness.
D)all of these.
Q4) If the cost of employee wages is NOT a significant portion of the total product cost,the wages are classified as factory overhead cost.
A)True
B)False
Page 12
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Chapter 11: Cost Behavior and Cost-Volume-Profit Analysis
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139 Verified Questions
139 Flashcards
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Sample Questions
Q1) A low operating leverage is normal for highly automated industries.
A)True
B)False
Q2) The point where the profit line intersects the horizontal axis on the profit-volume chart represents
A)the maximum possible operating loss.
B)the maximum possible operating income.
C)the total fixed costs.
D)the break-even point.
Q3) Tucker Co.manufactures office furniture.During the most productive month of the year,3,600 desks were manufactured at a total cost of $192,000.In its slowest month,the company made 1,200 desks at a cost of $72,000.Using the high-low method of cost estimation,total fixed costs per month are
A)$120,000.
B)$12,000.
C)$72,000.
D)$11,600.
Q4) Total variable costs change as the level of activity changes.
A)True
B)False
Page 13
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Chapter 12: Differential Analysis and Product Pricing
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Sample Questions
Q1) A practical approach that is frequently used by managers when setting normal long-run prices is the
A)cost-plus approach.
B)economic theory approach.
C)price graph approach.
D)market price approach.
Q2) The amount of income that would result from an alternative use of cash is called opportunity cost.
A)True
B)False
Q3) A business is considering a cash outlay of $250,000 for the purchase of land,which it intends to lease for $40,000 per year.If alternative investments are available that yield an 16% return,the opportunity cost of the purchase of the land is
A)$45,000.
B)$37,800.
C)$47,200.
D)$40,000.
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Chapter 13: Budgeting and Standard Cost Systems
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Sample Questions
Q1) In most businesses,cost standards are established principally by accountants. A)True
B)False
Q2) Changes in technology,machinery,or production methods may make past cost data irrelevant when setting standards.
A)True
B)False
Q3) The direct materials cost variance is
A)$6,500 unfavorable.
B)$9,000 unfavorable.
C)$9,000 favorable.
D)$6,500 favorable.
Q4) The sales budget is the starting point for preparation of the direct labor cost budget. A)True
B)False
Q5) The capital expenditures budget summarizes future plans for acquisition of fixed assets.
A)True
B)False
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Chapter 14: Performance Evaluation for Decentralized Operations
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Sample Questions
Q1) The major advantage of residual income as a performance measure is that it gives consideration to not only a minimum rate of return on investment but also the total magnitude of income from operations earned by each division.
A)True
B)False
Q2) The amount of detail presented in a budget performance report for a cost center depends upon the level of management to which the report is directed.
A)True
B)False
Q3) If Division Q's income from operations was $60,000 on invested assets of $400,000,the rate of return on investment is 15%.
A)True
B)False
Q4) The rate of return on investment may be computed by dividing investment turnover by the profit margin.
A)True
B)False
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Chapter 15: Capital Investment Analysis
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103 Verified Questions
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Sample Questions
Q1) When evaluating a proposal by use of the net present value method,if there is an excess of the present value of future cash inflows over the amount to be invested,the rate of return on the proposal exceeds the rate used in the analysis.
A)True
B)False
Q2) The amount of the estimated average income for a proposed investment of $60,000 in a fixed asset,giving effect to depreciation (straight-line method),with a useful life of four years,no residual value,and an expected total income yield of $22,300,is
A)$10,800.
B)$5,575.
C)$5,400.
D)$15,000.
Q3) All of the following qualitative considerations may impact upon capital investments analysis EXCEPT
A)time value of money.
B)employee morale.
C)the impact on product quality.
D)manufacturing flexibility.
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