Fundamentals of Accounting Exam Bank
Course Introduction
Fundamentals of Accounting introduces students to the essential concepts and principles underlying financial and managerial accounting. The course covers the accounting cycle, including the preparation and analysis of financial statements, double-entry bookkeeping, and the application of generally accepted accounting principles (GAAP). Students learn how organizations record financial transactions, manage assets and liabilities, and report performance to internal and external stakeholders. Emphasis is placed on understanding basic accounting terminology, interpreting financial information, and applying accounting techniques to support business decision-making.
Recommended Textbook
Fundamental Financial Accounting Concepts 10th Edition by Thomas P Edmonds
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13 Chapters
1246 Verified Questions
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Page 2
Chapter 1: An Introduction to Accounting
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Sample Questions
Q1) Which of the following is not an element of the financial statements?
A)Net income
B)Revenue
C)Assets
D)Cash Answer: D
Q2) What was the balance of Packard's Retained Earnings account before closing in Year 1?
A)$400
B)$0
C)$350
D)$450
Answer: B
Q3) Dividends paid by a company are reported on which of the following financial statement(s)?
A)Income statement
B)Statement of changes in stockholders' equity
C)Statement of cash flows
D)Statement of changes in stockholders' equity and statement of cash flows
Answer: D
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Chapter 2: Accounting for Accruals and Deferrals
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Sample Questions
Q1) Two of the steps in the accounting cycle are adjusting the accounts and closing the accounts.
A)True
B)False
Answer: True
Q2) Duluth Co.collected a $6,000 cash advance from a customer on November 1,Year 1 for services to be provided over a six-month period beginning on that date.If the year-end adjustment is properly recorded,what will be the effect of the adjusting entry on Duluth's Year 1 financial statements?
A)Increase assets and decrease liabilities
B)Increase assets and increase revenues
C)Decrease liabilities and increase revenues
D)No effect
Answer: C
Q3) Which of the following are "matched" under the matching concept?
A)Expenses and revenues
B)Expenses and liabilities
C)Assets and equity
D)Assets and liabilities
Answer: A
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Chapter 3: The Double-Entry Accounting System
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Sample Questions
Q1) The type of transaction that would be represented by a debit to one asset and a credit to another asset is an asset source transaction.
A)True
B)False
Answer: False
Q2) A trial balance can only be prepared at the end of the fiscal year,as part of the adjusting and closing processes.
A)True
B)False Answer: False
Q3) Debits decrease asset accounts.
A)True
B)False Answer: False
Q4) Many companies choose to end their fiscal years during a part of the year when they expect low activity.
A)True
B)False Answer: True
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Chapter 4: Accounting for Merchandising Businesses
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Sample Questions
Q1) What effect will the return of merchandise to the supplier in event (2)have on Darlington's financial statements?
A)Assets and stockholders' equity decrease by $1,176.
B)Assets and liabilities decrease by $1,176.
C)Assets and liabilities decrease by $1,200.
D)None.It is an asset exchange transaction.
Q2) What is the term used to describe a firm that primarily sells merchandise to other businesses?
A)Wholesale firm
B)Service firm
C)Retail firm
D)Consulting firm
Q3) Jake Co.purchased on account merchandise with a list price of $90,000.Payment terms were 1/15,n/45.If collection occurs within 18 days,what discount will Jake Co.recognize on the merchandise?
A)$13,500
B)$900
C)$500
D)$0
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Page 6
Chapter 5: Accounting for Inventories
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Sample Questions
Q1) If a company overstates its Inventory balance at the end of Year 1 due to an error,its Retained Earnings will also be overstated on the Year 1 balance sheet.
A)True
B)False
Q2) What is meant by "market" in the lower-of-cost-or-market rule?
A)The amount of gross margin earned by selling merchandise.
B)The amount the goods were sold for during the period.
C)The amount that would have to be paid to replace the merchandise.
D)The amount originally paid for the merchandise.
Q3) What is the amount of gross margin assuming the FIFO cost flow method?
A)$2,920
B)$3,420
C)$3,000
D)$4,020
Q4) In most businesses,the physical flow of goods occurs on a FIFO basis,but a different cost flow method is allowed under generally accepted accounting principles.
A)True
B)False
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Page 7
Chapter 6: Internal Control and Accounting for Cash
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Sample Questions
Q1) Even a good system of internal controls can be circumvented by collusion among employees.
A)True
B)False
Q2) Which of the following internal control procedures should be implemented to control cash?
A)Disbursements by prenumbered checks
B)Depositing cash receipts in the bank on a timely basis
C)Providing copies of written receipts to customers
D)All of these answer choices are correct
Q3) Which of the following describes an activity that increases a company's bank account balance?
A)Credit memo
B)Debit memo
C)Balance sheet
D)Certified check
Q4) Typical adjustments to the unadjusted bank balance on a bank reconciliation include deposits in transit and outstanding checks.
A)True
B)False
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Chapter 7: Accounting for Receivables
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Sample Questions
Q1) Which of the following best describes the percent of receivables method?
A)Income statement approach
B)Direct write-off approach
C)Credit sales approach
D)Balance sheet approach
Q2) How does the year-end adjusting entry to recognize uncollectible accounts expense affect the elements of the financial statements?
A)Decrease total assets and decrease stockholders' equity.
B)Increase total assets and decrease stockholders' equity.
C)Increase total liabilities and increase stockholders' equity.
D)Decrease total liabilities and increase stockholders' equity.
Q3) Using the allowance method of accounting for uncollectible receivables requires an estimate of the amount of receivables that will not be collected.
A)True
B)False
Q4) The direct write-off method does a better job of matching revenues and expenses than does the allowance method.
A)True
B)False
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Chapter 8: Accounting for Long-Term Operational Assets
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Sample Questions
Q1) On January 1,Year 1 Missouri Co.purchased a truck that cost $57,000.The truck had an expected useful life of 10 years and a $6,000 salvage value.Missouri uses the double declining-balance method.What is the amount of depreciation expense recognized in Year 2?
A)$9,120
B)$11,400
C)$10,200
D)$8,160
Q2) Glick Company purchased oil rights on July 1,Year 1 for $2,400,000.A total of 200,000 barrels of oil are expected to be extracted over the assets life,and 30,000 barrels are extracted and sold in Year 1.Which of the following correctly summarizes the effect of the Year 1 depletion expense on the elements of the financial statements?
A)A decrease in stockholders' equity of $200,000
B)A decrease in assets of $360,000
C)A decrease in assets of $300,000
D)An increase in stockholders' equity of $400,000
Q3) Land differs from other property because it is not subject to depreciation.
A)True
B)False
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Page 10
Chapter 9: Accounting for Current Liabilities and Payroll
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Sample Questions
Q1) A company's classified balance sheet shows current assets of $8,650 and current liabilities of $6,000.What is the company's current ratio?
A)0.69 to 1
B)1.44 to 1
C)1.16 to 1
D)3.26 to 1
Q2) Which of the following accounts appear in the liabilities section of the balance sheet?
A)Accounts payable,notes payable,allowance for doubtful accounts
B)Warranties payable,discount on notes payable,accounts payable
C)Notes payable,discount on notes payable,credit card receivables
D)Accounts payable,allowance for doubtful accounts,warranties payable
Q3) The current ratio is a measure of a company's liquidity.
A)True
B)False
Q4) If a company is in a region in which floods or earthquakes are deemed to be possible,the company should record a contingent liability.
A)True
B)False
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Chapter 10: Accounting for Long-Term Debt
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Sample Questions
Q1) For a long-term note payable,repaying a portion of principal along with interest payments is called loan amortization.
A)True B)False
Q2) Peak Enterprises issued bonds with a face value of $500,000,receiving cash of $508,000.To record this event,Bonds Payable should be credited for $500,000.
A)True B)False
Q3) Which of the following statements is true regarding the straight-line method of amortizing discounts and premiums on bonds?
A)It assigns variable amounts of interest over the term of the liability.
B)It uses compound interest principles.
C)It assigns the same amount of interest to each interest period over the life of the bond. D)It accurately reports the amount of interest expense incurred during each interest period.
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Chapter 11: Proprietorships,partnerships,and Corporations
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Sample Questions
Q1) Which of the following statements about why companies choose not to pay cash dividends is (are)true?
A)The board and management prefer to reinvest all net income for future growth.
B)The corporation does not have sufficient cash.
C)The corporation does not have sufficient retained earnings.
D)All of these statements are true.
Q2) What is the amount of retained earnings that will be transferred to paid-in capital as a result of the stock dividend issued by Gilligan Corporation?
A)$60,500
B)$16,500
C)$44,000
D)$108,500
Q3) Lack of ease in transferability of ownership is one of the disadvantages of the corporate form of business organization.
A)True
B)False
Q4) A distribution by a sole proprietorship to the owner is called a withdrawal.
A)True
B)False
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Chapter 12: Statement of Cash Flows
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Sample Questions
Q1) Which of the following would not be a cash flow from financing activities?
A)Borrowing on a long-term note payable
B)Repayment of principal on bonds payable
C)Payment of interest on bonds payable
D)Payment of a cash dividend
Q2) How is the cash paid to purchase land reported in the statement of cash flows?
A)Cash outflow from financing activities
B)Schedule of noncash investing and financing activities
C)Cash outflow from investing activities
D)Cash inflow from operating activities
Q3) Belvedere Corporation had a balance in its Equipment account on January 1,Year 1 of $320,000.During the year,equipment originally costing $85,000 and having Accumulated Depreciation of $20,000 was sold for $67,000.The ending balance of the Equipment Account was $275,000.How much did the company spend to purchase additional equipment during Year 1?
A)$40,000
B)$25,000
C)$90,000
D)$92,000
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Page 14
Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Factor(s)involved in communicating useful information is (are):
A)Attributes of the users
B)Purpose for which the information will be used
C)Process by which the information is analyzed
D)All of these answers are correct.
Q2) All of the following are considered to be measures of a company's short-term debt-paying ability except:
A)Current ratio.
B)Earnings per share.
C)Inventory turnover.
D)Average collection period.
Q3) You are considering an investment in Facebook stock and wish to assess the company's position in the stock market.All of the following ratios can be used except:
A)Dividend yield.
B)Earnings per share.
C)Working capital.
D)Price-earnings ratio.
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