Fundamentals of Accounting Solved Exam Questions
Course Introduction
Fundamentals of Accounting introduces students to the essential principles and concepts that form the foundation of accounting practices. The course covers basic accounting terminology, the accounting cycle, double-entry bookkeeping, and the preparation of financial statements such as balance sheets, income statements, and cash flow statements. Students will gain an understanding of how to record, classify, and summarize financial transactions, and how these processes support informed business decision-making. Emphasis is placed on the importance of ethical standards, accuracy, and the use of accounting information in both personal and organizational contexts.
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Financial and Managerial Accounting Information for Decisions 5th Edition by John J Wild
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Chapter 1: Introducing Accounting in Business
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Sample Questions
Q1) The accounting equation implies that: Assets + Liabilities = Equity.
A)True
B)False
Answer: False
Q2) Beta Corporation purchased $100,000 worth of land by paying 10,000 cash and signing a $90,000 mortgage.Immediately prior to this transaction the corporation had assets,liabilities,and owners' equity in the amounts of $150,000,$30,000,and $120,000 respectively.What is the total amount of Beta Corporation's assets after this transaction has been recorded?
A) $240,000
B) $250,000
C) $160,000
D) $40,000
E) $260,000
Answer: A
Q3) Explain the role of accounting in the information age.
Answer: Accounting is an information and measurement system.It identifies,records,and communicates relevant,reliable,and comparable information about business activities.Accounting also includes the crucial process of analysis and interpretation.
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Chapter 2: Analyzing and Recording Transactions
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Sample Questions
Q1) The account used to record the transfers of assets from a business to its stockholders is:
A) A revenue account
B) The dividends account
C) Common stock account
D) An expense account
E) A liability account
Answer: B
Q2) A trial balance that balances is not proof of complete accuracy in recording transactions.
A)True
B)False
Answer: True
Q3) _________________ identify and describe transactions and events and provide objective evidence and amounts for recording.
Answer: Source documents
Q4) Dividends are a type of business expense.
A)True
B)False
Answer: False
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Chapter 3: Adjusting Accounts and Preparing Financial Statements
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Q1) During the year,Able Co.purchased $39,600 worth of supplies,at the end of the year,the balance sheet showed a balance of $1,760 in the Supplies account.Prepare the necessary adjusting entry.
Answer: Supplies Expense .$37,840 Supplies ....$37,840
Q2) A _____________ account is an account linked with another account,having an opposite normal balance and reported as a subtraction from that other account's balance.
Answer: contra
Q3) Which of the following errors would cause the Balance Sheet columns of a work sheet to be out of balance?
A) Entering an asset amount in the Income Statement Debit column.
B) Entering a liability amount in the Income Statement Credit column.
C) Entering an expense amount in the Balance Sheet Debit column.
D) Entering a revenue amount in the Balance Sheet Debit column.
E) Entering a liability amount in the Balance Sheet Credit column.
Answer: D
Q4) Profit margin equals ___________________ divided by net sales. Answer: net income
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Chapter 4: Accounting for Merchandising Operations
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Q1) Merchandise inventory consists of products that a company acquires to resell to customers.
A)True
B)False
Q2) A debit to Sales Returns and Allowances and a credit to Accounts Receivable:
A) Reflects an increase in amount due from a customer.
B) Recognizes that a customer returned merchandise and/or received an allowance.
C) Requires a debit memorandum to recognize the customer's return.
D) Is recorded when a customer takes a discount.
E) Reflects an increase in net sales.
Q3) Cash sales shorten the operating cycle for a merchandiser; credit purchases lengthen operating cycles.
A)True
B)False
Q4) The acid-test ratio reflects the ___________ of a company.
Q5) Cost of goods sold represents the value of merchandise sold to customers.
A)True
B)False
Q6) What are the differences between the periodic and the perpetual inventory systems?
Page 6
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Chapter 5: Inventories and Cost of Sales
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Sample Questions
Q1) Monthly or quarterly statements are called interim statements because they are prepared between the traditional annual statement dates.
A)True
B)False
Q2) Given the following information,determine the cost of ending inventory at December 31 using the weighted-average perpetual inventory method.
December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 11: 12 units were sold at $35 per unit.
December 15: 20 units were purchased at $10.15 per unit.
December 22: 18 units were sold at $35 per unit.
A) $51.75
B) $83.22
C) $41.30
D) $49.75
E) $50.75
Q3) Identify the items that are included in merchandise inventory.(In your answer address the special situations of goods in transit,consigned goods,and damaged goods.)
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Chapter 6: Cash and Internal Controls
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Q1) Controls of cash disbursements are important for companies as most large thefts occur from payment of fictitious invoices.
A)True
B)False
Q2) The days' sales uncollected ratio is calculated by dividing accounts receivable by net sales and multiplying this quotient by 365.
A)True B)False
Q3) The entry to increase the balance in petty cash from $50 to $75 would be to credit the Petty Cash account in the amount of $25.
A)True
B)False
Q4) In order to streamline the purchasing process,department managers should place orders directly with suppliers.
A)True B)False
Q5) Two limitations of internal control systems are ____________________ and ________________.
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Chapter 7: Accounts and Notes Receivable
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Q1) Corona Company has credit sales of $4.60 million for year 2014.The company estimates that 1.42% of accounts receivable will be uncollectible.On December 31,2014,the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $13,164.Corona prepares a schedule of its December 31,2014,accounts receivable by age.Based on past experience,it estimates the percent of receivables in each age category that will become uncollectible.This information is summarized here: \(\begin{array}{ccc}
\text { December 31,2014}&\text { Age of Accounts}&\text { Expected Percent}\\ \text { Accounts Receivable}&\text { Receivable}&\text { Uncollectible}\\
\$ 720,000 & \text { Not yet due } & 1.05 \% \\
252,000 & 1 \text { to } 30 \text { days past due } & 1.80 \\
49,600 & 31 \text { to } 60 \text { days past clue } & 6.30 \\
14,100 & 61 \text { to } 90 \text { days past due } & 31.75 \\ 2,850 & \text { Over } 90 \text { days past due } & 66.00 \end{array}\)
Assuming the company uses the percent of accounts receivable method,determine the amount that should be recorded for bad debt expense on December 31,2014.
Q2) Explain how to record the receipt of a note receivable.
Q3) Explain the options a company has when converting its receivables to cash.
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Chapter 8: Long-Term Assets
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Q1) Describe the accounting for natural resources,including their acquisition,cost allocation,and account titles.
Q2) A company paid $314,000 for a machine that was expected to last five years and have a salvage value of $40,000.During the third year of the machine's life,$37,000 cash was paid for replacement parts that were expected to increase the machine's productivity by 10% each year.Prepare the journal entry to record the $37,000 cost incurred in the third year.
Q3) Acme Company has a total asset turnover of 1.25 for the current period.What are net sales given that average total assets are $40,000?
A) Net sales cannot be computed from the given information
B) $50,000
C) $32,000
D) $1.25 million
E) $90,000
Q4) The _____________________ principle requires that companies report the amount of accumulated depreciation on plant assets as well as the depreciation methods used to determine the annual depreciation expense.
Q5) Explain the purpose and method of depreciation for partial years.
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Chapter 9: Current Liabilities
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Q1) A company sells its product subject to a warranty that covers the cost of parts for repairs during the six months after the date of sale.Warranty costs are estimated to be 6% of sales.During the month of June,the company performed warranty work and used $12,000 worth of parts for the warranty repairs.The total sales for June were equal to $450,000.
1.Record the warranty expense for the month of June.
2.Record the costs of the warranty work completed in June.
3.If the Estimated Warranty Liability account had a credit balance of $10,000 on May 31,what is the account balance at June 30?
Q2) If a company had net income of $2,379,600,interest expense of 234,000,a tax rate of 40%,and operating income of $4,200,000,what is the times interest earned ratio?
A)10.17
B) 17.95 C) 7.78 D) 7.18 E) 4.07
Q3) Times interest earned ratio is computed by dividing _______________ by interest expense.
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Chapter 10: Long-Term Liabilities
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Q1) A company enters into an agreement to make five annual year-end payments of $3,000 each,which will begin one year from now.The annual interest rate is 6%.The present value of an annuity factor for five periods,6%,is 4.2124.What is the present value of these five payments?
Q2) Interest payments on bonds are determined by multiplying the par value of the bond by the stated contract rate.
A)True
B)False
Q3) If a bond's interest period does not coincide with the issuing company's accounting period,an adjusting entry is necessary to recognize bond interest expense accruing since the most recent interest payment.
A)True
B)False
Q4) The effective interest method yields increasing amounts of bond interest expense and decreasing amount of premium amortization over the life of the bond .
A)True
B)False
Q5) Identify and explain the different types and payment patterns of notes payable.
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Chapter 11: Corporate Reporting and Analysis
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Sample Questions
Q1) A corporation was formed on January 1.The corporate charter authorized 100,000 shares of $10 par value common stock.During the first month of operation,the corporation issued 300 shares to its attorneys in payment of a $5,000 charge for drawing up the articles of incorporation.The entry to record this transaction would include:
A) A debit to Organization Expenses for $3,000.
B) A debit to Organization Expenses for $5,000.
C) A credit to Common Stock for $5,000.
D) A credit to Contributed Capital in Excess of Par Value, Common Stock, for $5,000.
E) A debit to Contributed Capital in Excess of Par Value, Common Stock, for $2,000.
Q2) ___________________________ are corrections of material errors in prior period financial statements.
Q3) The total amount of cash and other assets the corporation receives from its stockholders in exchange for common stock is called
Q4) The price-earnings (PE)ratio is calculated by dividing ___________________________ by
Q5) What are the rights generally granted to common stockholders?
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Chapter 12: Reporting Cash Flows
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Q1) Use the following calendar-year information to prepare David Company's statement of cash flows using the direct method.You may omit the schedule reconciling net income and net cash provided or used by operating activities.
\[\begin{array} { | l | r | }
\hline \text { Cash paid to purchase machinery } & \$ 124 _ { 2 } 000 \\
\hline \text { Cash paid for merchardise irventory } & 220,000 \\
\hline \text { Cash paid for operatirre expenses } & 280,000 \\
\hline \text { Cash paid for interest } & 4,000 \\
\hline \text { Cash received for interest } & 10,000 \\
\hline \text { Cash proceeds from sale of land } & 100,000 \\
\hline \text { Cash balance at begirning of year } & 15,000 \\
\hline \text { Cash balance at end of year } & 77,000 \\
\hline \text { Cash borrowed on a short-ternn note } & 25,000 \\
\hline \text { Cash dividends paid } & 24,000 \\
\hline \text { Cash received from stock issuarice } & 57,000 \\
\hline \text { Cash collections from customers } & 522,000 \\
\hline \end{array}\]
Q2) The cash flow on total assets ratio is computed by dividing _____________ by
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Chapter 13: Analysis of Financial Statements
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Q1) The comparison of a company's financial condition and performance to a base amount is known as _____________________________.
Q2) Liquidity and efficiency are measures of a company's ability to meet short-term obligations.
A)True
B)False
Q3) A good financial statement analysis report often includes the following sections: Executive summary,analysis overview,evidential matter,assumptions,key factors,and inferences.
A)True
B)False
Q4) An advantage of common-size statements is that they reflect the relative sizes of different companies under analysis.
A)True
B)False
Q5) Profitability is the ability to generate positive market expectations.
A)True
B)False
Q6) Explain the form and content of a complete income statement.
Page 15
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Chapter 14: Managerial Accounting Concepts and Principles
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Q1) Which of the following is never included in direct materials costs?
A) Invoice costs of direct materials.
B) Outgoing delivery charges.
C) Materials storage costs.
D) Materials handling costs.
E) Insurance on stored material.
Q2) Raw materials inventory includes only direct materials.
A)True
B)False
Q3) The orientation of just-in-time manufacturing is that products are "pulled" through the manufacturing process by the orders received from customers.
A)True
B)False
Q4) A ___________________ cost has already been incurred and cannot be avoided or changed,so it irrelevant to decision making.
Q5) The concept of total quality management focuses on continuous improvement. A)True
B)False
Q6) Identify the three categories of manufacturing costs.
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Chapter 15: Job Order Costing and Analysis
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Q1) When a job is finished,its job cost sheet is completed and moved from the file of jobs in process to the file of finished jobs that are yet to be delivered to customers.
A)True
B)False
Q2) The amount by which the overhead applied to jobs during a period exceeds the overhead incurred during the period is known as:
A) Adjusted overhead.
B) Estimated overhead.
C) Predetermined overhead.
D) Underapplied overhead.
E) Overapplied overhead.
Q3) Overapplied overhead is the amount by which actual overhead cost exceeds the overhead applied to products during the period.
A)True
B)False
Q4) The collection of job cost sheets for all jobs in process makes up the subsidiary ledger controlled by the _____________________ inventory.
Q5) How does job order cost accounting affect the company Astor and Black?
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Chapter 16: Process Costing
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Q1) Hybrid costing systems can only be applied to agricultural products.
A)True
B)False
Q2) The Machining Department started the current month with beginning goods in process inventory of $10,000.During the month,it was assigned the following costs: direct materials,$76,000; direct labor,$24,000; and factory overhead,50% of direct labor cost.Also,inventory with a cost of $109,000 was transferred out of the department to the next phase in the process.The ending balance of the Goods in Process Inventory account for the Machining Department is:
A) $13,000
B) $1,000
C) $49,000
D) $110,000
E) $3,000
Q3) Compare and contrast the FIFO and weighted-average methods of process costing.
Q4) A materials consumption report is a source document that summarizes the materials used during a reporting period.
A)True
B)False
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Chapter 17: Activity-Based Costing and Analysis
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Q1) Product costs consist of direct labor,direct materials,and ______________.
Q2) A company estimates that overhead costs for the next year will be $3,600,000 for indirect labor,$200,000 for factory utilities,and $21,500 for depreciation on factory machinery.The company uses machine hours as its overhead allocation base.If 764,300 machine hours are planned for this next year,what is the company's plantwide overhead rate?
Q3) Product costs consist of direct labor,direct materials,manufacturing overhead,and indirect costs.
A)True
B)False
Q4) A method of assigning overhead costs to a product using a single overhead rate is:
A) Plantwide overhead rate method.
B) Cost pool overhead rate method.
C) Departmental overhead rate method.
D) Activity-based costing.
E) Overhead cost allocation method.
Q5) The plantwide overhead rate is determined by using volume-related measures.
A)True
B)False
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Chapter 18: Cost-Volume-Profit Analysis
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Q1) A step-wise variable cost can be separated into a fixed component and a variable component.
A)True
B)False
Q2) Schmidt Inc,manufactures inexpensive cameras that sell for $50.Fixed costs are $720,000 and variable costs are $30.00 per unit.Schmidt can buy a newer production machine that will increase fixed costs by $14,400 per year but will increase variable costs by 10% per unit.What are the original and the new break-even points in this situation?
A) Original $43,200; New $36,720.
B) Original $36,000; New $36,720.
C) Original $36,000; New $42,353.
D) Original $36,000; New $43,200.
E) Original $24,000; New $41,506.
Q3) A cost-volume-profit (CVP)chart is a graph that plots volume on the horizontal axis and costs and sales on the vertical axis.
A)True
B)False
Q4) Define variable cost,fixed cost,and mixed cost.
Q5) What is the high-low method? Briefly describe how it is applied.
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Chapter 19: Variable Costing and Performance Reporting
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Q1) Under absorption costing,a company had the following unit costs when 10,000 units were produced: \(\begin{array}{ll}
\text { Direct labor } & \$ 2 \text { per unit } \\
\text { Direct material } & \$ 3 \text { per unit } \\
\text { Variable overhead } & \$ 4 \text { per unit } \\
\cline { 2 - 2 } \text { Total variable } & \$ 9 \text { per unit } \\
\text { Fixed overhead }(\$ 50,000 / 10,000 \text { units) } & \$ 5 \text { per unit } \\
\text { Total production cost } & \$ 14 \text { per unit } \end{array}\)
The total production cost per unit under absorption costing if 25,000 units had been produced would be $11.
A)True
B)False
Q2) ________________________ costing treats fixed overhead as a period cost.
Q3) What are the limitations of using variable costing?
Q4) What is a contribution margin report?
Q5) Absorption costing is also called ________________________ costing.
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Chapter 20: Master Budgets and Performance Planning
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Q1) Based on the information from Julia's,the total amount of cash expected to be received from customers in July is:
A) $69,750
B) $90,000
C) $92,250
D) $22,500
E) $115,500
Q2) A budget is best described as:
A) A formal statement of a company's future plans usually expressed in monetary terms.
B) A master control device.
C) An informal statement of company future plans usually expressed in monetary terms.
D) The most crucial component of a company evaluation process.
E) The minimum acceptable performance level.
Q3) A rolling budget is a specific budget application relevant only to a merchandising company.
A)True
B)False
Q4) What are rolling budgets? Why are rolling budgets prepared?
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Chapter 21: Flexible Budgets and Standard Costs
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Q1) A company had a $56,000 unfavorable direct material quantity variance during a time period when the standard price per pound of direct material was $7 and the actual price per pound of direct material was $7.50.If the standard quantity of direct material allowed for production was 52,000 pounds,how many pounds of direct material were actually used during this period?
A) 60,000 pounds
B) 44,000 pounds
C) 56,000 pounds
D) 364,000 pounds
E) 420,000 pounds
Q2) A company's flexible budget for 48,000 units of production showed variable overhead costs of $72,000 and fixed overhead costs of $64,000.The company incurred overhead costs of $122,800 while operating at a volume of 40,000 units.The total controllable cost variance is:
A) $1,200 favorable
B) $1,200 unfavorable
C) $13,200 favorable
D) $13,200 unfavorable
E) $15,200 favorable
Q3) Identify the four steps in the budgetary control process.
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Chapter 22: Decentralization and Performance Measurement
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Q1) Joint costs can be allocated either using a physical basis or a value basis.
A)True
B)False
Q2) An _______________________ is a department whose manager is responsible for using the center's assets to generate income for the center.
Q3) Which of the following is most likely to be considered a profit center?
A) An individual retail store in a large chain.
B) The grocery department of a Walmart Supercenter or Target Superstore.
C) The maintenance department of a large retail operation.
D) The personnel office of a business.
E) A stand-alone eye clinic.
Q4) Define joint costs and explain how joint costs can be allocated.
Q5) Define an investment center.How are investment centers evaluated?
Q6) Describe the information found on a responsibility accounting performance report.
Q7) Explain the difference between direct and indirect expenses in accounting for departments.
Page 24
Q8) A transfer price has no direct impact on a company's overall profits.
A)True
B)False
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Chapter 23: Relevant Costing for Managerial Decisions
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Q1) In this chapter,you examined several short-term managerial decision tasks.Identify (list)any three of these types of decision tasks:
Q2) An additional cost that is incurred only if a particular action is taken is a(n):
A) Period cost
B) Pocket cost
C) Discount cost
D) Incremental cost
E) Sunk cost.
Q3) The concept of incremental cost is the same as the concept of differential cost. A)True B)False
Q4) Incremental costs are also called out-of-pocket costs. A)True B)False
Q5) __________________________ costs are amounts the company would not incur if a segment was eliminated.
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Chapter 24: Capital Budgeting and Investment Analysis
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Q1) Which methods of evaluating a capital investment project ignore the time value of money?
A) Net present value and accounting rate of return.
B) Accounting rate of return and internal rate of return.
C) Internal rate of return and payback period.
D) Payback period and accounting rate of return.
E) Net present value and payback period.
Q2) If net present values are used to evaluate two investments that have equal costs and equal total cash flows,the one with more cash flows in the early years has the higher net present value.
A)True
B)False
Q3) If two projects have the same risks,the same payback periods,and the same initial investments,they are equally attractive.
A)True
B)False
Q4) There is only one method of evaluating capital budgeting decisions.
A)True
B)False
Q5) Internal rate of return is expressed as a _________________.
Page 27
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Chapter 25: Accounting With Special Journals
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Q1) The flexibility principle of accounting information systems requires that the:
A) Benefits from an activity outweigh the costs of the activity.
B) System report useful, understandable, timely, and pertinent information for effective decision making.
C) System aid managers in controlling and monitoring business activities.
D) System adapt to changes in the company, business environment, and needs of decision makers.
E) System conform with a company's activities, personnel, and structure.
Q2) A __________________ is an all-purpose journal that can record any transaction.
Q3) A typical sales journal is used to record cash sales. A)True
B)False
Q4) The general journal is used for transactions not covered by special journals and for regular,adjusting,closing,and correcting entries. A)True
B)False
Q5) __________________ processing accumulates source documents for a period of time and then processes them all at once such as daily,weekly,or monthly.
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Chapter 26: Time Value of Money
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Q1) Future value can be found if the interest rate (i),the number of periods (n),and the present value (p)are known.
A)True
B)False
Q2) The present value of $5,000 per year for three years at 12% compounded annually is $12,009.
A)True B)False
Q3) Interest is the borrower's payment to the owner of an asset for its use.
A)True
B)False
Q4) Troy has $105,000 now.He has a loan of $175,000 that he must pay at the end of five years.He can invest his $105,000 at 10% interest compounded semiannually.Will Troy have enough to pay his loan at the end of the five years?
Q5) _____________ is a borrower's payment to the owner of an asset for its use.
Q6) Explain the concept of the present value of a single amount.
Q7) An annuity is a series of equal payments occurring at equal intervals.
A)True
B)False
Page 29
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Chapter 27: Investments and International Operations
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176 Verified Questions
176 Flashcards
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Sample Questions
Q1) Short-term investments in held-to-maturity debt securities are accounted for using the:
A) Market value method with market adjustment to income.
B) Market value method with market adjustment to equity.
C) Cost method with amortization.
D) Cost method without amortization.
E) Equity method.
Q2) Long-term investments include investments in land or other assets not used in a company's operations.
A)True
B)False
Q3) As a long-term investment,Elmer's Equipment Enterprise purchased 20% of Sticky Supplies Inc.'s 300,000 shares for $350,000 at the beginning of the fiscal year of both companies.On the purchase date,the fair value and book value of Sticky's net assets were equal.During the year,Sticky's earned net income of $430,000 and distributed cash dividends of 0.42 cents per share.The fair value of Sticky's assets at the end of the year totaled $349,450.What is Elmer's balance for this investment at the end of the year,assuming there is no significant control?
Q4) Explain how to record the sale of trading securities.
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Chapter 28: Accounting for Partnerships
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126 Verified Questions
126 Flashcards
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Sample Questions
Q1) Kathleen Reilly and Ann Wolf decide to form a partnership on August 1.Reilly invested the following assets and liabilities in the new partnership: \[\begin{array} {| l |c| c| } \hline
& \text { Cost / Book Value } & \text { Market Value } \\
\hline \text { Larnd } & \$ 75,000 & \$ 100,000 \\
\hline \text { Buildirg } & \$ 50,000 & \$ 300,000 \\
\hline \text { Nate Payable } & \$ 198,000 & \$ 198,000\\ \hline \end{array}\]
The note payable is associated with the building and the partnership will assume the responsibility for the loan.Wolf invested $60,000 in cash and $105,000 in new equipment in the new partnership.Prepare the journal entries to record the two partner's original investments in the new partnership.
Q2) ___________________________ means that partners can commit or bind the partnership to any contract within the scope of the partnership business.
Q3) A _____________________ is an unincorporated association of two or more people to pursue a business for profit as co-owners.
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