Fundamentals of Accounting
Textbook Exam Questions
Course Introduction
Fundamentals of Accounting provides students with a comprehensive introduction to basic accounting principles and practices. This course covers essential topics such as the accounting cycle, recording financial transactions, preparing financial statements, and understanding the role of accounting in business decision-making. Students will learn about concepts like assets, liabilities, equity, revenues, and expenses, and gain practical skills in bookkeeping and financial analysis. Emphasis is placed on the use of accounting information for internal and external reporting, ensuring that students develop a foundational understanding necessary for advanced study or entry-level positions in the field of accounting.
Recommended Textbook
Financial and Managerial Accounting 8th Edition by John J Wild
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Chapter 1: Accounting in Business
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Q1) Explain why ethics are an integral part of accounting.
Answer: The purpose of accounting is to provide useful information for decision makers.For information to be useful,it must be trusted.This requires ethical behavior by accountants and managers in all phases of gathering,analyzing and reporting financial information so that good decisions are made.
Q2) The difference between a company's assets and its liabilities,or net assets is:
A)Net income.
B)Expense.
C)Equity.
D)Revenue.
E)Net loss.
Answer: C
Q3) ________ are beliefs that separate right from wrong and are considered accepted standards of good and bad behavior.
Answer: Ethics
Q4) ________ are the increases in equity from a company's sales of products and services to customers.
Answer: Revenues
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Chapter 2: Accounting for Business Transactions
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Q1) A ________ is a list of all the accounts used by a company and their identification codes but does not contain the balances.
Answer: chart of accounts
Q2) If a company purchases equipment paying cash,the journal entry to record this transaction will include a debit to Cash.
A)True
B)False
Answer: False
Q3) A company had total assets of $350,000,total liabilities of $101,500,and total equity of $248,500.Calculate the company's debt ratio.
Answer: Debt Ratio = Total Liabilities/ Total Assets = $101,500/$350,000 = 29%
Q4) Revenues and expenses are two categories of ________ accounts. Answer: equity
Q5) You decrease the Accounts Payable account on the ________ side of its account. Answer: left or debit
Q6) Credits always increase account balances.
A)True
B)False
Answer: False
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Chapter 3: Adjusting Accounts for Financial Statements
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Q1) On November 1,Jasper Company loaned another company $100,000 at a 6.0% interest rate.The note receivable plus interest will not be collected until March 1 of the following year.The company's annual accounting period ends on December 31,and adjustments are only made at year-end.The adjusting entry needed on December 31 is:
A)No entry required.
B)Debit Interest Expense,$5,000; credit Interest Payable,$5,000.
C)Debit Interest Expense,$1,000; credit Note Payable,$1,000.
D)Debit Interest Receivable,$500; credit Interest Revenue,$500.
E)Debit Interest Receivable,$1,000; credit Interest Revenue,$1,000.
Answer: E
Q2) Discuss the importance of periodic reporting and the time period assumption. Answer: For information to be valuable to decision makers,it must be presented in a timely fashion.To provide timely information for decision making,accounting systems are designed to prepare periodic reports at regular intervals.The time period assumption assumes that an organization's activities can be divided into specific time periods such as months,quarters or years.
Q3) ________ expenses are those costs that are incurred in a period but are both unpaid and unrecorded.
Answer: Accrued
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Chapter 4: Accounting for Merchandising Operations
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Q1) Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.
A)True B)False
Q2) A company has sales of $695,000 and cost of goods sold of $278,000.Its gross profit equals:
A)$(417,000).
B)$695,000.
C)$278,000.
D)$417,000.
E)$973,000.
Q3) The gross margin ratio equals net sales less ________ divided by net sales.
Q4) Describe the difference(s)between the periodic and the perpetual inventory accounting systems.
Q5) Under a perpetual inventory system,when a credit customer returns non-defective merchandise to the seller,the seller debits Sales Returns and Allowances and credits Accounts Receivable and also debits Merchandise Inventory and credits Cost of Goods Sold.
A)True
B)False
6
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Chapter 5: Inventories and Cost of Sales
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Q1) Determine the cost assigned to cost of goods sold using LIFO.
A)$2,590
B)$2,850
C)$2,580
D)$2,860
E)$2,460
Q2) The cost of an inventory item includes its invoice cost minus any discount,plus any added or incidental costs necessary to put it in a place and condition for sale.
A)True
B)False
Q3) The simple rule for inventory turnover is that a low ratio is preferable. A)True
B)False
Q4) If the company uses the LIFO periodic inventory method,what would be the cost of the ending inventory?
Q5) What advantages does a perpetual inventory system have over periodic inventory system?
Q6) Explain the reason a company might use gross profit inventory method for valuing inventory.
7
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Chapter 6: Cash,fraud,and Internal Controls
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Q1) Proper internal control would require that a department manager inform the purchasing department of its needs for additional merchandise by preparing and signing a purchase requisition which lists the merchandise requested to be purchased. A)True
B)False
Q2) ________ are checks written by the depositor,deducted on the depositor's records,and sent to the payee,but not yet recorded by the bank at the bank statement date.
Q3) Plenty Co.established a petty cash fund of $150 on October 1.On October 10,the petty cash fund was replenished when there was $49 remaining and there were petty cash receipts for: office supplies,$47; transportation-in on inventory purchased,$32; and postage,$22.On October 15,the petty cash fund was decreased to $125 in total.Plenty Co.uses the perpetual inventory system.Record the above transactions in general journal form.
Q4) After the petty cash fund is established,the Petty Cash account is not debited or credited again unless the amount of the fund is changed.
A)True
B)False
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Chapter 7: Accounting for Receivables
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Q1) Craigmont uses the allowance method to account for uncollectible accounts.Its year-end unadjusted trial balance shows Accounts Receivable of $104,500,allowance for doubtful accounts of $665 (credit)and sales of $925,000.If uncollectible accounts are estimated to be 4% of accounts receivable,what is the amount of the bad debts expense adjusting entry?
A)$4,845
B)$4,180
C)$3,515
D)$3,700
E)$3,850
Q2) When posting a dishonored note to a customer's account,an explanation is included so as not to misinterpret the debit as a sale on account.
A)True
B)False
Q3) Allowance for Doubtful Accounts is a contra asset; its balance is added to Accounts receivable.
A)True
B)False
Q4) ________ is the charge for using borrowed money until its due date.
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Chapter 8: Accounting for Long-Term Assets
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Q1) Additional costs of plant assets that provide benefits extending beyond the current period; they increase or improve the type or amount of service an asset provides are treated as ________.
Q2) The cost of an intangible asset is systematically allocated to depreciation expense over its estimated useful life.
A)True
B)False
Q3) The purchase of a property that included land,building,and related improvements is called a lump-sum or basket purchase.
A)True
B)False
Q4) Extraordinary repairs:
A)Are revenue expenditures.
B)Extend the useful life of an asset beyond its original estimate.
C)Are credited to accumulated depreciation.
D)Are additional costs of plants assets that do not materially increase the asset's life.
E)Are expensed when incurred.
Q5) How is the cost computed for individual assets purchased as a lump-sum?
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Chapter 9: Accounting for Current Liabilities
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Q1) A short-term note payable:
A)Is a written promise to pay a specified amount on a stated future date within one year or the company's operating cycle,whichever is longer.
B)Is a contingent liability.
C)Is an estimated liability.
D)Is not a liability until the due date.
E)Cannot be used to extend the payment period for an account payable.
Q2) If the end of an accounting period occurs between the signing of a note payable and its maturity date,interest expense should not be accrued until the note is paid.
A)True B)False
Q3) A company had income before interest expense and income taxes of $186,000,and its interest expense is $55,000.Calculate the company's times interest earned ratio.
Q4) The total compensation an employee earns including wages,salaries,commissions,bonuses,and any compensation earned before deductions such as taxes is called ________.
Q5) Gross pay less all deductions is called ________.
Q6) Identify and explain the types of employer payroll taxes.
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Chapter 10: Accounting for Long-Term Liabilities
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Q1) A company issued 7%,5-year bonds with a par value of $100,000.The market rate when the bonds were issued was 7.5%.The company received $97,947 cash for the bonds.Using the effective interest method,the amount of interest expense for the first semiannual interest period is:
A)$3,500.00.
B)$3,673.01.
C)$3,705.30.
D)$7,000.00.
E)$7,346.03.
Q2) If an issuer sells bonds at a premium:
A)The carrying value of the bond stays constant over time.
B)The carrying value increases from the par value to the issue price over the bond's term.
C)The carrying value decreases from the par value to the issue price over the bond's term.
D)The carrying value increases from the issue price to the par value over the bond's term.
E)The carrying value decreases from the issue price to the par value over the bond's term.
Q3) An ________ is an obligation requiring a series of payments to the lender.
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Chapter 11: Corporate Reporting and Analysis
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Q1) A stock split increases total stockholders' equity.
A)True
B)False
Q2) If a company has noncumulative preferred stock,basic earnings per share is equal to net income less preferred dividends declared divided by the number of weighted average common shares outstanding.
A)True
B)False
Q3) Changes in accounting estimates are accounted for in current and future periods.
A)True
B)False
Q4) Dividing stockholders' equity applicable to common shares by the number of common shares outstanding yields the book value per common share.
A)True
B)False
Q5) Declaration of a stock dividend results in a liability being recorded.
A)True B)False
Q6) What is treasury stock? What reasons might a company hold treasury stock?
Page 13
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Chapter 12: Reporting Cash Flows
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Q1) When using the indirect method to calculate and report the net cash provided or used by operating activities,net income is adjusted for all but which of the following?
A)Gains and losses from nonoperating items.
B)Revenues and expenses that did not provide or use cash.
C)Changes in noncurrent assets and noncurrent liabilities.
D)Changes in current liabilities related to operating activities.
E)Depreciation and amortization expense.
Q2) Net cash flows from financing activities for the year were:
A)$147,000 of net cash used.
B)$26,000 of net cash used.
C)$347,000 of net cash used.
D)$51,000 of net cash used.
E)$340,000 of net cash used.
Q3) To be classified as a cash equivalent,the only criterion an item must meet is that it must be readily convertible to a liquid asset.
A)True
B)False
Q4) ________ activities include the cash effects of transactions and events that determine net income.
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Chapter 13: Analysis of Financial Statements
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Q1) Yeats Corporation's sales in Year 1 were $396,000 and in Year 2 were $380,000.Using Year 1 as the base year,the percent change for Year 2 compared to the base year is:
A) 104%
B)100%
C) 4.0
D)96%
E)4.2%
Q2) Standards for comparison when interpreting financial statements include competitor and industry performance data.
A)True
B)False
Q3) Evaluation of company performance does not include analysis of (1)past and current performance,(2)current financial position,and (3)future performance and risk. A)True
B)False
Q4) A good financial statement analysis report usually includes the following six sections: (1)________,(2)________,(3)________,(4)________ (5)________,and (6)________.
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Chapter 14: Managerial Accounting Concepts and Principles
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Q1) A manufacturing company's beginning finished goods inventory was $29,000; cost of goods manufactured for the year was $316,000; and the ending finished goods inventory was $31,000.What is the cost of goods sold for the year?
Q2) Products that are in the process of being manufactured but are not yet complete are called:
A)Raw materials inventory.
B)Conversion costs.
C)Cost of goods sold.
D)Work in process inventory.
E)Finished goods inventory.
Q3) The Institute of Management Accountants (IMA)Statement of Ethical Professional Practice requires that management accountants be competent and act with integrity.
A)True
B)False
Q4) List the four goals of an internal control system.
Q5) ________ inventory consists of goods a company acquires to use in making products.
Page 16
Q6) What are prime costs? What are conversion costs?
Q7) A manufacturer's inventory that is not completely finished is called ________ .
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Chapter 15: Job Order Costing and Analysis
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Q1) Compute the predetermined overhead rate.
A)180%.
B)55.6%.
C)186%.
D)184%.
E)96.6%.
Q2) The journal entry to record indirect materials used includes a debit to Work in Process Inventory.
A)True
B)False
Q3) The journal entry to record the application of factory overhead to production is:
A)Debit Work in Process Inventory $225,000; credit Factory Overhead $225,000.
B)Debit Work in Process Inventory $165,000; credit Factory Overhead $165,000.
C)Debit Factory Payroll $150,000; credit Work in Process Inventory $150,000.
D)Debit Factory Overhead $165,000; credit Work in Process Inventory $165,000.
E)Debit Work in Process Inventory $165,000; credit Factory Payroll $165,000.
Q4) A company that uses a job order costing system incurred $10,000 of factory payroll during May.Prepare the May 31 entry assuming $8,000 is direct labor and $2,000 is indirect labor.
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Chapter 16: Process Costing and Analysis
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Q1) If the units completed were transferred to the Labeling Department,what is the appropriate journal entry to transfer the direct materials?
A)Work in Process-Labeling $135,500; Work in Process-Canning $135,500.
B)Work in Process-Labeling $176,500; Work in Process-Canning $176,500.
C)Finished Goods-Labeling $135,500; Finished Goods-Canning $135,500.
D)Work in Process-Labeling $176,500; Finished Goods-Canning $176,500.
E)Finished Goods $136,000; Work in Process $136,000.
Q2) Conversion cost per equivalent unit is the combined costs of direct materials and factory overhead.
A)True
B)False
Q3) A process cost summary shows the cost of a particular job manufactured in the reporting period.
A)True
B)False
Q4) In a process costing system,factory labor costs incurred in a reporting period are presented on the income statement as Factory Labor Expense.
A)True
B)False
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Chapter 17: Activity-Based Costing and Analysis
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Q1) Which of the following would not be considered a product cost?
A)Direct material costs.
B)Factory supervisor's salary.
C)Direct labor costs.
D)Budget accountant's salary.
E)Manufacturing overhead costs.
Q2) What is the total overhead cost assigned to the Loaded model?
A)$31,875.
B)$36,000.
C)$28,125.
D)$34,050.
E)$31,125.
Q3) How much overhead will be assigned to Product B using activity-based costing?
A)$56,500
B)$78,000
C)$62,500
D)$197,000
E)$70,000
Q4) What is the basic principle underlying activity-based costing?
Q5) What are the major advantages of using a plantwide overhead rate?
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Chapter 18: Cost Behavior and Cost-Volume-Profit Analysis
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Q1) Raven Company has a target of $70,000 pre-tax income.The contribution margin ratio is 30%.What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000?
A)$23,333.
B)$36,000.
C)$300,000.
D)$353,333.
E)$420,000.
Q2) Contribution margin per unit is the amount by which a product's unit selling price exceeds its variable cost per unit.
A)True
B)False
Q3) A CVP graph presents data on:
A)Profit and loss on a per unit basis.
B)Profit,loss,and break-even on a total dollar basis.
C)Profit,loss,and break-even on a per unit basis.
D)Only profit and loss on a total basis.
E)Profit and loss on a budget and actual basis.
Q4) Define the break-even point of a company.
Q5) What is the high-low method? Briefly describe how it is applied.
Page 20
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Chapter 19: Variable Costing and Analysis
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Q1) Which of the following statements is true?
A)Variable costing treats fixed overhead as a period cost.
B)Absorption costing treats fixed overhead as a period cost.
C)Absorption costing treats fixed overhead as an expense in the period it is incurred.
D)Variable costing excludes all overhead from product costs.
E)Managers can manipulate earnings more easily under variable costing by varying the production level.
Q2) Given the Galaxy,Inc.data,what is net income using absorption costing?
A)$11,275,000
B)$17,400,000
C)$16,360,000
D)$16,800,000
E)$16,220,000
Q3) ________ and ________ are product costs that can be directly traced to the product.
Q4) A per unit cost that is constant at all production levels is a ________ cost per unit.
Q5) What is a contribution margin report?
Q6) How can the use of absorption costing result in overproduction?
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Chapter 20: Master Budgets and Performance Planning
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Q1) A capital expenditures budget is prepared before the operating budgets.
A)True
B)False
Q2) Operating budgets include all the following budgets except the:
A)Sales budget.
B)Selling expense budget.
C)Cash budget.
D)Production budget.
E)General and administrative expense budget.
Q3) What is a merchandise purchases budget? How is the merchandise purchases budget prepared?
Q4) Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for August.The direct labor requirement per unit is 0.50 hours.Labor is paid at the rate of $21 per hour.The total cost of direct labor budgeted for the month of August is:
A)$82,950.
B)$4,050.
C)$85,050.
D)$3,950.
E)$168,000.
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Chapter 21: Flexible Budgets and Standard Costs
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Q1) Job #411 was budgeted to require 3.5 hours of labor at $11.00 per hour.However,it was completed in 3 hours by a person who worked for $14.00 per hour.What is the total labor cost variance for Job #4115?
Q2) Seafarer Company established a standard direct materials cost of 1.5 gallons at $2 per gallon for one unit of its product.During the past month,actual production was 6,500 units.The material quantity variance was $700 favorable and the material price variance was $470 unfavorable.The entry to charge Work in Process Inventory for the standard material costs during the month and to record the direct material variances in the accounts would include all of the following except:
A)A debit to Work in Process for $19,500.
B)A credit to Raw Materials for $19,270.
C)A debit to Direct Material Price Variance for $470.
D)A credit to Direct Material Quantity Variance for $700.
E)A debit to Cost of Goods Sold for $230.
Q3) The fixed overhead variance can be broken down into the ________ variance and the ________ variance.
Q4) The difference between the total actual overhead cost incurred and the total standard overhead cost applied is the ________.
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Chapter 22: Performance Measurement and Responsibility Accounting
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Q1) A system of performance measures,including nonfinancial measures,used to assess company and division manager performance is:
A)Hurdle rate.
B)Return on investment.
C)Balanced scorecard.
D)Residual income.
E)Investment turnover.
Q2) The amount of the advertising cost that should be allocated to Grinding for the current period is:
A)$16,250.
B)$45,000.
C)$23,750.
D)$325,000.
E)$54,250.
Q3) Investment center managers are typically evaluated using performance measures that combine income and assets.
A)True
B)False
Q4) Define joint costs and explain how joint costs can be allocated.
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Chapter 23: Relevant Costing for Managerial Decisions
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Q1) Contribution margin lost from a decline in sales is an opportunity cost.
A)True
B)False
Q2) The potential benefits lost by taking a specific action when two or more alternative choices are available is known as a(n):
A)Alternative cost.
B)Sunk cost.
C)Out-of-pocket cost.
D)Differential cost.
E)Opportunity cost.
Q3) An out-of-pocket cost requires a future outlay of cash and is relevant for current and future decision making.
A)True
B)False
Q4) If the cost to buy a part is less than the direct material,direct labor,and incremental overhead cost of making the part,the company should buy the part.
A)True
B)False
Q5) Identify the five steps involved in managerial decision-making.
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Chapter 24: Capital Budgeting and Investment Analysis
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Q1) The payback period is the amount of time for the investment to generate enough net cash flow to return the initial cost of investment.
A)True
B)False
Q2) The calculation of annual net cash flow from a particular investment project should include all of the following except:
A)Income taxes.
B)Revenues generated by the investment.
C)Cost of products generated by the investment.
D)Depreciation expense.
E)General and administrative expenses.
Q3) If Management was not concerned with the time value of money,from which two capital budgeting methods should they choose?
A)IRR or Payback.
B)ARR or Payback.
C)BET or IRR.
D)BET or NPV.
E)NPV or Payback.
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Chapter 25: Time Value of Money
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Q1) Protocol Company has acquired equipment from a dealer that requires equal payments of $12,000 at the end of each of the next five years.This transaction includes interest at 9%,compounded annually.What is the value of the machine today?
Q2) A company has $46,000 today to invest in a fund that will earn 4% compounded annually.How much will the fund contain at the end of 6 years? (PV of $1,FV of $1,PVA of $1,and FVA of $1)\(\bold{\text{(Use appropriate factor(s)from the tables provided.)}}\)
A)$58,204
B)$47,840
C)$58,075
D)$57,040
E)$62,582
Q3) A company has $46,000 today to invest in a fund that will earn 4% compounded annually.How much will the fund contain at the end of 6 years?
Q4) Present and future value computations enable companies to measure or estimate the interest component of holding assets or liabilities over time.
A)True
B)False
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Chapter 26: Investments
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Questions
Q1) To prepare consolidated financial statements when a U.S.parent company has an international subsidiary,the international subsidiary's financial statements must be translated into U.S.dollars.
A)True
B)False
Q2) Trading securities are debt securities a company plans to hold long-term,possibly until maturity.
A)True
B)False
Q3) Investments in debt securities that the company actively manages and trades for profit are referred to as short-term debt investments in:
A)Available-for-sale securities.
B)Held-to-maturity securities.
C)Trading securities.
D)Realizable securities.
E)Liquid securities.
Q4) Short-term investments are also called marketable securities.
A)True
B)False
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Chapter 27: Lean Principles and Accounting
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30 Flashcards
Source URL: https://quizplus.com/quiz/69122
Sample Questions
Q1) Haupt Inc.manufacturers water pumps.Each pump requires $155 of raw materials and $315 of conversion costs.Each pump is sold for $725.Last month Haupt produced and sold 69 pumps.The journal entry to record cost of goods sold would include:
A)Debit to accounts receivable of $32,430.
B)Credit to sales of $32,430.
C)Debit to cost of goods sold of $32,430.
D)Credit to cost of goods sold of $50,025.
E)Debit to sales of $50,025.
Q2) Value streams include all activities needed to create customer value.
A)True
B)False
Q3) Vista Company has 25 days' payable outstanding based on the current year's cost of goods sold of $11,315.What is Vista's balance in accounts payable?
A)$775
B)$870
C)$750
D)$675
E)$810
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