Fundamentals of Accounting Pre-Test Questions
Course Introduction
Fundamentals of Accounting introduces students to the basic principles and concepts of accounting, providing a solid foundation for understanding the recording, classification, and summarization of business transactions. The course covers essential topics such as the accounting cycle, preparation and interpretation of financial statements, double-entry bookkeeping, the use of ledgers and journals, and the role of accounting in decision-making. Emphasis is placed on developing analytical skills necessary to interpret accounting information and understand its importance in the broader context of business and finance.
Recommended Textbook
Survey of Accounting 6th Edition by Carl S. Warren
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15 Chapters
1713 Verified Questions
1713 Flashcards
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Chapter 1: The Role of Accounting in Business
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96 Flashcards
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Sample Questions
Q1) Expressing financial data as if a business will continue operating for an indefinite period time refers to which concept?
A) Business entity concept
B) Going concern concept
C) Objectivity concept
D) Adequate disclosure concept
Answer: B
Q2) All merchandising businesses are organized as corporations.
A)True
B)False
Answer: False
Q3) Which of the following is an intangible asset?
A) Patent
B) Cash
C) Land
D) Equipment
Answer: A
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Page 3
Chapter 2: Basic Accounting Concepts
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Sample Questions
Q1) The basic elements of a financial accounting system include a framework for preparing financial statements.
A)True
B)False
Answer: True
Q2) What are the basic elements of a financial accounting system?
Answer: A financial accounting system is designed to produce financial statements. The basic elements of a financial accounting system include:
(1)A set of rules for determining what, when, and the amount that should be recorded (2)A framework for preparing financial statements
(3)One or more controls to determine whether errors may have arisen in the recording process.
Q3) For EFG Co., the transaction "payment of quarterly taxes" would:
A) increase total assets.
B) decrease total assets.
C) have no effect on total assets.
D) increase stockholders' equity.
Answer: B
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4
Chapter 3: Accrual Accounting Concepts
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111 Flashcards
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Sample Questions
Q1) Rights that are short-term in nature are called intangible assets.
A)True
B)False
Answer: False
Q2) Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?
A) A decrease in inventory
B) A decrease in accounts payable
C) Preferred dividends declared and paid
D) A decrease in accounts receivable
Answer: B
Q3) 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
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Chapter 4: Accounting for Merchandising Businesses
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138 Flashcards
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Sample Questions
Q1) The amount of the total cash paid to the seller for merchandise purchased would normally include:
A) only the list price.
B) only the sales tax.
C) the list price plus the sales tax.
D) the list price less the sales tax.
Q2) The arrangements between buyer and seller as to when payments for merchandise are to be made are called:
A) credit terms.
B) net cash.
C) cash on demand.
D) gross cash.
Q3) Which of the following would not affect the operating activities section of the statement of cash flows, using the indirect method?
A) Decrease in merchandise inventory
B) Payment on a note payable
C) Decrease in unearned rent
D) Depreciation expense
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6
Chapter 5: Sarbanes-Oxley, Internal Control, and Cash
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110 Flashcards
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Sample Questions
Q1) A voucher is a form where pertinent data about a liability and the particulars of its payment are recorded.
A)True
B)False
Q2) Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the customer. What adjustment is required in the depositor's accounts?
A) Increase Notes Receivable; decrease Cash
B) Increase Cash; increase Miscellaneous Income
C) Increase Cash; decrease Notes Receivable
D) Increase Accounts Receivable; decrease Cash
Q3) Employee fraud is the intentional act of deceiving an employer for personal gain.
A)True B)False
Q4) Bank customers are considered owners of the bank, so the bank shows their accounts as an asset on the bank's records.
A)True
B)False
Q5) 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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Sample Questions
Q1) A note receivable due in 90 days is listed on the balance sheet under:
A) long-term liabilities.
B) fixed assets.
C) current liabilities.
D) current assets.
Q2) Inventories of merchandising and manufacturing businesses are reported as current assets on the balance sheet.
A)True
B)False
Q3) After the accounts are adjusted at the end of the fiscal year, Accounts Receivable has a balance of $430,000 and Allowance for Doubtful Accounts has a balance of $30,000. What is the net realizable value of the receivables?
A) $30,000
B) $460,000
C) $430,000
D) $400,000
Q4) Lower-of-cost-or-market is a method of inventory valuation.
A)True
B)False
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Chapter 7: Fixed Assets and Intangible Assets
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Sample Questions
Q1) If a company sells a fixed asset for an amount which is less than its book value, a gain must be recognized.
A)True
B)False
Q2) Which type of depreciation occurs when an asset can no longer provide services for which it was intended?
A) Physical depreciation
B) Market depreciation
C) Cost depreciation
D) Functional depreciation
Q3) The acquisition costs of property, plant, and equipment should include all costs necessary to get the asset in place and ready for use.
A)True
B)False
Q4) A gain is recorded on the sale of fixed assets when:
A) the asset is sold for a price less than its book value.
B) the asset is sold for a price more than its book value.
C) accumulated depreciation on asset is less than its selling price.
D) accumulated depreciation on asset is more than its selling price.
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Chapter 8: Liabilities and Stockholders Equity
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Sample Questions
Q1) Treasury stock is a contra-equity account.
A)True
B)False
Q2) The following accounts and their balances appear in the ledger on December 31 of the current year: \(\begin{array}{ll}
\$ 400,000 & \text { CommonStock, } \$ 20 \text { par } \\ 44,000 & \text { Paid-In Capital in Excess of Par } \\ 265,000 & \text { RetainedEarnings } \\ 20,000 & \text { Treasuy Stock } \end{array}\)
Prepare the Stockholders' Equity section of the balance sheet as of December 31. Twenty five thousand shares of common stock are authorized, and 1,000 shares have been reacquired.
Q3) The declaration and issuance of a stock dividend does not affect the total amount of a corporation's assets, liabilities, or stockholders' equity.
A)True
B)False
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Chapter 9: Financial Statement Analysis
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Sample Questions
Q1) Statements in which all items are expressed as percentages with no dollar amounts are called common-sized statements.
A)True
B)False
Q2) Which of the following ratios provides a solvency measure that shows the margin of safety of noteholders or bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?
A) Ratio of fixed assets to long-term liabilities
B) Ratio of net sales to assets
C) Number of days' sales in receivables
D) Rate earned on stockholders' equity
Q3) The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as:
A) solvency and leverage.
B) solvency and profitability.
C) solvency and liquidity.
D) solvency and equity.
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Chapter 10: Accounting Systems for Manufacturing Businesses
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Sample Questions
Q1) Which of the following statements is true of financial accounting?
A) Under financial accounting, reports are prepared using generally accepted accounting principles.
B) Financial accounting focuses on providing information primarily for internal use.
C) Financial accounting includes more subjective data like possibility of competitors' reactions to a company's new sales prices.
D) Information reported by financial accounting is not shared with those outside the company.
Q2) Which of the following would not be classified as direct materials for an auto manufacturer?
A) Steel
B) Upholstery fabric
C) Cost of the engine of the car.
D) Material used for door panels
Q3) Indirect labor is included in factory overhead.
A)True
B)False
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Page 12
Chapter 11: Cost Behavior and Cost-Volume-Profit Analysis
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) A low operating leverage is normal for highly automated industries.
A)True
B)False
Q2) Currently, fixed costs are $450,000, the unit selling price is $75, and the unit variable cost is $50. What would be the break-even sales (in units), if the unit selling price is increased by $5?
A) 8,182 units
B) 9,000 units
C) 15,000 units
D) 18,000 units
Q3) When a business sells more than one product at varying selling prices, the business's break-even point can be determined as long as the number of products does not exceed:
A) two.
B) three.
C) fifteen.
D) there is no limit.
Q4) Variable cost per unit remains the same regardless of activity level.
A)True
B)False
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Chapter 12: Differential Analysis and Product Pricing
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Sample Questions
Q1) When a product or segment of a business is determined to be generating a loss, the total income from operations for the company will always increase if management eliminates the product or segment.
A)True
B)False
Q2) What pricing method is used if all costs are considered and a fair markup is added to determine the selling price?
A) Total cost method
B) Demand-based method
C) Variable cost method
D) Markup method
Q3) In using the variable cost concept of applying the cost-plus approach to product pricing, what is included in the markup?
A) Total costs plus desired profit
B) Desired profit
C) Total selling and administrative expenses plus desired profit
D) Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit
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Chapter 13: Budgeting and Standard Cost Systems
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Sample Questions
Q1) Standard costs serve as a device for measuring efficiency.
A)True
B)False
Q2) In preparing flexible budgets, the first step is to identify the fixed and variable components of the various costs and expenses being budgeted.
A)True
B)False
Q3) Once a static budget has been determined, it is changed regularly as the underlying activity changes.
A)True
B)False
Q4) It would be most appropriate to develop direct labor time standards for use in administrative activities when the activity involves:
A) repetitive task that produces common output.
B) nonrepetitive task that produces common output.
C) top-level management.
D) task related to nonmeasurable output.
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Chapter 14: Performance Evaluation for Decentralized Operations
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Sample Questions
Q1) In the rate of return on investment analysis, the investment turnover component focuses on the efficiency in the use of assets and indicates the number of sales dollar generated for each dollar of invested assets.
A)True
B)False
Q2) Responsibility accounting reports for profit centers will include:
A) only costs.
B) only revenues.
C) both expenses and fixed assets.
D) revenues, expenses, and net income or loss from operations.
Q3) Identify the formula for the rate of return on investment.
A) Invested Assets/Income From Operations
B) Sales/Invested Assets
C) Income From Operations/Sales
D) Income From Operations/Invested Assets
Q4) If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the profit margin calculated would be 20%.
A)True
B)False
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Chapter 15: Capital Investment Analysis
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Sample Questions
Q1) If the rate of earnings is 10% and the cash to be received in two years is $10,000, determine the present value amount, using the following partial table of present value of $1 at compound interest. \(\begin{array}{|l|l|l|l|}
\hline 12 \% & 10 \% & 6 \% & \text { Year } \\
\hline 0.893 & 0.909 & 0.943 & 1 \\
\hline 0.797 & 0.826 & 0.890 & 2 \\
\hline 0.712 & 0.751 & 0.840 & 3 \\
\hline 0.636 & 0.683 & 0.792 & 4 \\
\hline
\end{array}\)
A) $8,900
B) $8,260
C) $7,970
D) $9,090
Q2) The payback period is determined using which of the following formulas?
A) Amount to be invested/Annual average net income
B) Annual net cash flow/Amount to be invested
C) Annual average net income/Amount to be invested
D) Amount to be invested/Annual net cash flows
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