Fundamentals of Accounting Exam Review
Course Introduction
Fundamentals of Accounting introduces students to the basic principles and concepts of accounting, focusing on the systematic recording, reporting, and analysis of financial transactions. This course covers essential topics such as the accounting cycle, preparation of financial statements, and the interpretation of financial information for decision-making. Students will learn about double-entry bookkeeping, accruals, adjustments, and the ethical standards governing the profession. Designed for beginners, the course provides a solid foundation for further study in accounting and finance, equipping students with practical skills applicable in business environments.
Recommended Textbook
Financial and Managerial Accounting 11th Edition by
Carl S. Warren
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15 Chapters
2679 Verified Questions
2679 Flashcards
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Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) Debts owed by a business are referred to as
A) accounts receivables
B) assets
C) owner's equity
D) liabilities
Answer: D
Q2) The year-end balance of the retained earnings account appears in
A) both the retained earnings statement and the income statement
B) only the retained earnings statement
C) both the retained earnings statement and the balance sheet
D) both the retained earnings statement and the statement of cash flows
Answer: C
Q3) The statement of cash flows consists of three sections: cash flows from operating activities, cash flows from income activities, and cash flows from equity activities.
A)True
B)False
Answer: False
Q4) What are the three sections of the statement of cash flows?
Answer: Operating Activities, Investing Activities, and Financing Activities
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Chapter 2: Analyzing Transactions
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Sample Questions
Q1) The order of the flow of accounting data is (1) record in the ledger, (2) record in the journal, (3) prepare the financial statements.
A)True
B)False
Answer: False
Q2) Which of the following group 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) On August 30th, JumpStart paid numerous bills which include:
Payment to the landlord for August rent, $950
Payment to the Gas & Electric Company for August's bill, $525
Payment of employee wages for the last half of August, $1,880
Payment of shopping center's parking lot cleaning fee, $275
Journalize these payments as one compound journal entry.
Answer: 11ea9299_7dcd_c46a_85c7_b93ceaad5da5_TB6235_00
Q4) Prepare a journal entry on March 27 for the payment of $8,000 in dividends.
Answer: 11ea9299_7dce_128e_85c7_01882ae826fa_TB6235_00
Page 4
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) The balance in the prepaid rent account before adjustment at the end of the year is $24,000, which represents four months' rent paid on December 1. The adjusting entry required on December 31 is
A) debit Rent Expense, $6,000; credit Prepaid Rent, $6,000
B) debit Prepaid Rent, $18,000; credit Rent Expense, $6,000
C) debit Rent Expense, $18,000; credit Prepaid Rent, $6,000
D) debit Prepaid Rent, $6,000; credit Rent Expense, $6,000
Answer: A
Q2) An example of deferred revenue is Unearned Rent.
A)True
B)False
Answer: True
Q3) At January 31, the end of the first month of the year, the usual adjusting entry transferring expired insurance to an expense account was omitted. Which items will be incorrectly stated because of the error on (a) the income statement for January and (b) the balance sheet as of January 31? Also indicate whether the items in error will be overstated or understated.
Answer: 11ea9299_7dc3_b20b_85c7_03607acadff1_TB6235_00
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Page 5
Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) The income statement will include
A) revenues less expenses (ordered largest to smallest amount) with miscellaneous expense listed last
B) revenues less expenses (ordered smallest to largest amounts) with miscellaneous expense listed last
C) revenues less expenses (ordered in alphabetical order)
D) revenues less expenses (order is not important)
Q2) After all of the account balances have been extended to the Balance Sheet columns of the work sheet, the totals of the debit and credit columns show debits of $36,678 and the credits of $41,101. This indicates that
A) neither net income or loss can be calculated because it is found on the income statement
B) the company has a net loss of $4,423 for the period
C) the company has a net income of $4,423 for the period
D) The amounts are out of balance and need to be corrected
Q3) During the closing process, some balance sheet accounts are closed and end the period with a zero balance.
A)True
B)False
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Page 6
Chapter 5: Accounting for Merchandising Businesses
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Sample Questions
Q1) Which of the following accounts would be included in the chart of accounts of a merchandising company using the: (a) periodic inventory system, (b) perpetual inventory system, or (c) both systems?
(1) Sales Discounts
(2) Merchandise Inventory
(3) Sales
(4) Purchases Discounts
(5) Cost of Merchandise Sold
Q2) Which of the following accounts usually has a debit balance?
A) Purchase Discounts
B) Sales Tax Payable
C) Allowance for Doubtful Accounts
D) Freight In
Q3) What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?
A) gross profit
B) income from operations
C) net income
D) gross sales
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Chapter 6: Inventories
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Sample Questions
Q1) If a company uses the periodic inventory system to cost its inventory, the gross profit method is a method that can be used to check on theft when the actual inventory is taken by the company.
A)True
B)False
Q2) A perpetual inventory system is an effective means of control over inventory.
A)True
B)False
Q3) Stevens Company started the year with an inventory cost of $145,000. During the month of January they purchased inventory that cost of $53,000. January sales totaled $140,000. Estimated gross profit is 35%. The estimated ending inventory as of January 31 is
A) $58,000
B) $91,000
C) $107,000
D) $69,300
Q4) If ending inventory for the year is understated, net income for the year is overstated.
A)True
B)False
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Chapter 7: Sarbanes-Oxley, Internal Control, and Cash
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Sample Questions
Q1) A check drawn by a company in payment of a voucher for $635 was recorded in the journal as $365. 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) Green Valley Bank sent Comstock Industries its end of month bank statement for July. The end of month balance by the bank is $11,237.00. The statement shows that a deposit for $4,250.00 is in transit at the end of the statement period. The statement also revealed that checks for $87.00, $105.00, and $95.00 are outstanding. Green Valley collected a 90-day, 12% interest, $4,000.00 note receivable, charging $20.00 for the service. No interest has been accrued on the note. The bank charges a monthly account fee of $35.00. The end of month balance per company books is $11,135.00. Complete a bank/account reconciliation and write any necessary journal entries for the reconciliation.
Q3) Describe the features of a voucher system and list typical supporting documents for a voucher.
Q4) List and define each of the five elements of internal control.
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Chapter 8: Receivables
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Sample Questions
Q1) The maturity value of a note receivable is always the same as its face value.
A)True
B)False
Q2) Interest on a note can be calculated without knowledge of the A) note's maturity date
B) rate of interest
C) notes duration
D) principal amount
Q3) The equation for computing interest on an interest-bearing note is as follows: interest equals maturity value times interest rate times time.
A)True
B)False
Q4) If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible?
A) Uncollectible Accounts Receivable
B) Accounts Receivable
C) Allowance for Doubtful Accounts
D) Bad Debts Expense
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Chapter 9: Fixed Assets and Intangible Assets
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Sample Questions
Q1) Financial Statement data for the years ended December 31 for Parker Corporation is as follows:
2012 2011
Net Sales $2,595,600 $2,409,498
Fixed Assets:
Beginning of the year $901,070 $820,000
End of the year 829,330 901,070
a) Determine the Fixed Asset Turnover for 2012 and 2011.
b) Does the change in Fixed Asset Turnover from 2011 to 2012 indicate a favorable or unfavorable trend.?
Q2) Computer equipment was acquired at the beginning of the year at a cost of $45,000 that has an estimated residual value of $3,000 and an estimated useful life of 4 years. Determine the (a) depreciable cost, (b) straight-line rate, and (c) annual straight-line depreciation.
Q3) Assets may be grouped according to common traits and depreciated by using a single composite rate.
A)True
B)False
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11
Chapter 10: Current Liabilities and Payroll
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Sample Questions
Q1) The journal entry to record the cost of warranty repairs that were incurred during the current period, but related to sales made in prior years, includes a debit to Warranty Expense.
A)True
B)False
Q2) The borrower is the one who issues a note payable to a creditor.
A)True
B)False
Q3) Which of the following is not an internal control procedure for payroll?
A) employees observed clocking in and out
B) payroll depends on a fired employee's supervisor to notify them when an employee has been fired
C) payroll requires employees to show identification when picking up their paychecks
D) changes in pay rates on a computerized system must be tested by someone independent of payroll
Q4) An employee's take home pay is equal to gross pay less all voluntary deductions.
A)True
B)False
Q5) List five internal controls that relate directly to payroll.
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Chapter 11: Corporations: Organization, Stock Transactions, and Dividends
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Sample Questions
Q1) Significant changes in stockholders' equity are reported in A) income statement
B) retained earnings statement
C) statement of stockholders' equity
D) statement of cash flows
Q2) If the dividend amount of preferred stock, $50 par value, is quoted as 8%, then the dividends per share would be $4.
A)True
B)False
Q3) The initial owners of stock of a newly formed corporation are called directors.
A)True
B)False
Q4) The par value of common stock must always be equal to its market value on the date the stock is issued.
A)True
B)False
Q5) A corporation is a separate entity for accounting purposes but for legal purposes. A)True B)False
Page 13
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Chapter 12: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) One reason a dollar today is worth more than a dollar 1 year from today is the time value of money.
A)True
B)False
Q2) The journal entry a company records for the payment of interest, interest expense, and amortization of bond premium is
A) debit Interest Expense, credit Cash and Premium on Bonds Payable
B) debit Interest Expense, credit Cash
C) debit Interest Expense and Premium on Bonds Payable, credit Cash
D) debit Interest Expense, credit Interest Payable and Premium on Bonds Payable
Q3) Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption?
A) $3,000 loss
B) $3,000 gain
C) $7,000 loss
D) $7,000 gain
Q4) 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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Chapter 13: Investments and Fair Value Accounting
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Sample Questions
Q1) Accounting for the sale of stock is the same for both the cost and the equity methods of accounting for investments.
A)True B)False
Q2) Any gains or losses on the sale of bonds normally would be reported in the Other Income (Loss) section of the income statement.
A)True B)False
Q3) Investments in stocks that are expected to be held for the long term are listed in the stockholder's equity section of the balance sheet.
A)True
B)False
Q4) Ramiro Company purchased 40% of the outstanding stock of Marco Company on January 1, 2012. Marco reported net income of $80,000 and declared dividends of $20,000 during 2012. How much would Ramiro adjust their investment in Marco Company under the equity method?
Q5) Compare and contrast why companies invest cash in short-term temporary investments vs. long-term investments.
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) On the statement of cash flows, the cash flows from investing activities section would include
A) receipts from the issuance of capital stock
B) payments for dividends
C) payments for retirement of bonds payable
D) receipts from the sale of investments
Q2) Master Designs Company has cash flows for operating activities of $300,000. Cash flows used for investments in property, plant, and equipment totaled $65,000, of which 70% of this investment was used to replace existing capacity. What is the free cash flow for Master Designs?
Q3) To determine cash payments for merchandise for the cash flow statement using the direct method, a decrease in accounts payable is added to the cost of merchandise sold.
A)True
B)False
Q4) The statement of cash flows shows the effects on cash of a company's operating, investing, and financing activities.
A)True
B)False
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) Based on the following data for the current year, what is the inventory turnover? \(\begin{array}{ll}
\$ 500,000 & \text { Net sales on account during year } \\ 330,000 & \text { Cost of merchandise sold during ye } \mathrm{yr} \\
45,000 & \text { Accounts receivable, begiming of ye ar } \\
35,000 & \text { Accounts receivable, end of year } \\ 90,000 & \text { Inventory, begiming of year } \\
110,000 & \text { Inventory, end of year } \end{array}\)
A) 3.3
B) 8.3
C) 3.7
D) 3.0
Q2) Using measures to assess a business's ability to pay its current liabilities is called current position analysis.
A)True
B)False
Q3) Why would you compare or not compare Coca-Cola and Pepsi-Cola (PepsiCo) as companies to each other?
Q4) Define solvency and profitability. How are they alike?
Page 17
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