Fundamentals of Accounting Exam Review
Course Introduction
Fundamentals of Accounting introduces students to the basic principles and concepts underlying the accounting process. The course covers essential topics such as the accounting cycle, preparation of financial statements, double-entry bookkeeping, and the interpretation of financial information. Students will develop an understanding of accounts, ledgers, journals, and trial balances, as well as exposure to generally accepted accounting principles (GAAP). The course also explores the ethical considerations and the role of accounting in business decision-making, enabling students to acquire foundational skills for advanced study or entry-level industry roles.
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 Verified Questions
94 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) Rights to payments from customers are A)liabilities.
B)prepaid expenses.
C)accounts receivable.
D)accounts payable.
Answer: C
Q3) What is the basic accounting equation,and which financial statement is prepared from this equation?
Answer: Assets = Liabilities + Stockholders' Equity
The Balance Sheet
Q4) 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
Page 3
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Chapter 2: Basic Accounting Concepts
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88 Verified Questions
88 Flashcards
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Sample Questions
Q1) Johnson,Inc.paid rent expense of $3,500 for the month of October.How are the accounts affected due to this transaction?
A)Increase in cash $3,500 and increase in retained earnings $3,500
B)Increase in cash $3,500 and decrease in retained earnings $3,500
C)Decrease in cash $3,500 and decrease in retained earnings $3,500
D)Decrease in cash $3,500 and increase in retained earnings $3,500
Answer: C
Q2) On May 1,the cash account balance was $72,600.During May,cash receipts totaled $345,600 and the May 31 balance was $95,230.Determine the cash payments made during May.
Answer: 95,230 = 72,600 + 345,600 - ?
Cash payments = $322,970
Q3) Revenues decrease stockholders' equity.
A)True
B)False
Answer: False
Q4) The two sides of the accounting equation do NOT have to be equal.
A)True
B)False
Answer: False
Page 4
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Chapter 3: Accrual Accounting Concepts
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Cash and other assets that are expected to be converted to cash or sold or used up within one year or less through the normal operations of the business are called A)current assets.
B)intangible assets.
C)fixed assets.
D)notes receivable.
Answer: A
Q2) If prepaid insurance expires over time,this asset account becomes a(n) A)liability.
B)another asset.
C)revenue.
D)expense.
Answer: D
Q3) Under the accrual basis of accounting,net cash flows from operating activities on the statement of cash flows will normally be the same as net income.
A)True
B)False
Answer: False
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Chapter 4: Accounting for Merchandising Businesses
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) 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
Q2) A criticism of a single-step income statement is that net income is NOT available for analysis.
A)True
B)False
Q3) Sales discounts are granted by the seller to customers for payment at the end of the month.
A)True
B)False
Q4) Which of the following are subtracted from sales to arrive at net sales?
A)Sales returns
B)Merchandise inventory
C)Accounts receivable
D)Cost of merchandise sold
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Chapter 5: Sarbanes-Oxley,internal Control,and Cash
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) A check drawn by a depositor for $915 in payment of a liability was recorded as $195.What adjustment is required in the depositor's accounts?
A)Decrease Accounts Payable;decrease Cash
B)Increase Cash;decrease Accounts Receivable
C)Increase Cash;increase Accounts Payable
D)Increase Accounts Receivable;decrease Cash
Q2) Discuss what would be included under personnel policies.
Q3) The Sarbanes-Oxley Act of 2002 requires companies and their independent accountants to
A)report on the effectiveness of the company's internal controls.
B)report on any fraud and theft detected in the company.
C)report on the state of the economy and likelihood of fraud.
D)report on the financial activities of the company.
Q4) All bank memorandums reported on the bank reconciliation require entries in the depositor's accounts.
A)True
B)False
Q5) List the objectives of internal control and give an example of how each is implemented.
Page 7
Q6) Why would a bank require a company to maintain a compensating balance?
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Chapter 6: Receivables and Inventories
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) The due date on a 90-day note dated June 10 is September 8.
A)True
B)False
Q2) Receivables are usually a significant portion of
A)total current liabilities.
B)total liabilities.
C)total current assets.
D)total assets.
Q3) The balance of the allowance for doubtful accounts is deducted from accounts receivable on the balance sheet.
A)True
B)False
Q4) A 90-day,8% note for $10,000 dated May 1 is received from a customer on account. The maturity value of the note is
A)$10,000.
B)$10,800.
C)$10,200.
D)$9,800.
Q5) Other than accounts receivable and notes receivable,name other receivables that might be included on the balance sheet.
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Chapter 7: Fixed Assets and Intangible Assets
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) The removal of an old building to make the land ready for its intended use is charged to
A)land.
B)land improvements.
C)buildings.
D)operating expenses.
Q2) A current asset account must be increased for revenue expenditures since they only benefit the current period.
A)True
B)False
Q3) To measure depreciation,all of the following must be known EXCEPT A)market value.
B)residual value.
C)historical cost.
D)estimated life.
Q4) The straight-line method is appropriate if usage of the asset varies considerably from year to year.
A)True
B)False
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Chapter 8: Liabilities and Stockholders Equity
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132 Verified Questions
132 Flashcards
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Sample Questions
Q1) Federal unemployment compensation taxes that are collected by the federal government are not paid directly to the unemployed but are allocated among the states for use in state programs.
A)True
B)False
Q2) 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
Q3) Which of the following is usually NOT a prerequisite to paying a cash dividend?
A)Formal action by the board of directors
B)Market value in excess of par value per share
C)Sufficient cash
D)Sufficient retained earnings
Q4) Preferred stockholders must receive their current-year dividends before the common stockholders can receive any dividends.
A)True
B)False
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Chapter 9: Financial Statement Analysis
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83 Verified Questions
83 Flashcards
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Sample Questions
Q1) Ratios and various other analytical measures are NOT a substitute for sound judgment,nor do they provide definitive guides for action.
A)True
B)False
Q2) The excess of current liabilities over current assets is referred to as working capital.
A)True
B)False
Q3) If net income is $130,000 and interest expense is $40,000 for 2011,and the market price is $40,what is the price-earnings ratio on common stock (rounded to one decimal place)?
A)14.9
B)18.4
C)17.3
D)19.8
Q4) Which of the following is included in the computation of the quick ratio?
A)Prepaid rent
B)Accounts receivable
C)Inventory
D)Supplies
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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) Calculate cost of goods sold for Crawford,Inc.
A)$420,000
B)$370,000
C)$360,000
D)$276,500
Q2) Which of the following is an example of direct labor cost for an airplane manufacturer?
A)Cost of oil lubricants for factory machinery
B)Cost of wages of assembly worker
C)Salary of plant supervisor
D)Cost of jet engines
Q3) The period costs of a textbook printer would include A)wages of a press operator.
B)utility costs of the factory.
C)advertising expenses.
D)paper costs.
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
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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) Which of the following activity bases would be the most appropriate for gasoline costs of
A delivery service such as UPS?
A)Number of trucks employed
B)Number of miles driven
C)Number of trucks in service
D)Number of packages delivered
Q2) Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?
A)Direct labor
B)Salary of a factory supervisor
C)Units of production depreciation on factory equipment
D)Direct materials
Q3) Which of the following is an example of a cost that varies in total as the number of units produced changes?
A)Electricity per KWH to operate factory equipment
B)Monthly rent on a factory building
C)Straight-line depreciation on factory equipment
D)Salary of a production supervisor
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Page 13
Chapter 12: Differential Analysis and Product Pricing
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) When standard costs are used in applying the cost-plus approach to product pricing,the standards should be based upon ideal levels of performance.
A)True
B)False
Q2) Differential analysis can aid management in making decisions on a variety of alternatives,including whether to discontinue an unprofitable segment and whether to replace usable plant assets.
A)True
B)False
Q3) A business is considering a cash outlay of $500,000 for the purchase of land,which it could lease for $40,000 per year.If alternative investments are available that yield a 21% return,the opportunity cost of the purchase of the land is
A)$105,000.
B)$40,000.
C)$65,000.
D)$8,400.
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Chapter 13: Budgeting and Standard Cost Systems
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) What is the direct labor rate variance?
A)$3,000 unfavorable
B)$3,000 favorable
C)$2,400 unfavorable
D)$2,400 favorable
Q2) The first budget to be prepared is usually the sales budget.
A)True
B)False
Q3) A series of budgets for varying rates of activity is termed a(n)
A)flexible budget.
B)variable budget.
C)master budget.
D)activity budget.
Q4) If the standard to produce a given amount of product is 900 units of direct materials at $11 and the actual was 800 units at $12,the direct materials quantity variance was $1,100 unfavorable.
A)True B)False
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Chapter 14: Performance Evaluation for Decentralized Operations
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) The ratio of sales to invested assets is termed the investment turnover component of the rate of return on investment.
A)True
B)False
Q2) Which of the following expenses incurred by the sporting goods department of a department store is a direct expense?
A)Depreciation expense--office equipment
B)Insurance on inventory of sporting goods
C)Uncollectible accounts expense
D)Office salaries
Q3) Transfer prices may be used when decentralized units are organized as cost,profit,or investment centers.
A)True
B)False
Q4) A responsibility center in which the authority over and responsibility for costs and revenues is vested in the department manager is termed an investment center.
A)True
B)False
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Chapter 15: Capital Investment Analysis
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103 Verified Questions
103 Flashcards
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Sample Questions
Q1) A capital expenditures budget summarizes the decisions made for the acquisition of fixed assets for several future years.
A)True
B)False
Q2) Crane Company is considering the acquisition of a machine that costs $60,000.The machine is expected to have a useful life of 5 years,a negligible residual value,an annual cash flow of $15,000,and annual operating income of $15,000.What is the estimated cash payback period for the machine?
A)1.7 years
B)3 years
C)4 years
D)5 years
Q3) A series of equal cash flows at fixed intervals is termed a(n)
A)present value index.
B)price-level index.
C)net cash flow.
D)annuity.
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Page 17