Intermediate Accounting Exam
Practice Tests
Course Introduction
Intermediate Accounting builds on foundational financial accounting concepts to provide a more in-depth understanding of complex accounting topics. The course covers the recognition, measurement, and disclosure requirements for various types of assets, liabilities, and equity instruments, as established by generally accepted accounting principles (GAAP). Students will analyze financial statements, explore revenue recognition, and study accounting for income taxes, pensions, leases, and other advanced topics. Emphasis is placed on interpreting and applying accounting standards, problem-solving, and enhancing analytical skills necessary for professional accounting practice.
Recommended Textbook
Financial Managerial Accounting 16th Edition by Jan Williams
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Chapter 1: Accounting: Information for Decision Making
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Sample Questions
Q1) Statements of Financial Accounting Standards are developed by:
A) The Financial Accounting Standards Board.
B) Certified public accountants.
C) The Securities and Exchange Commission.
D) The Internal Revenue Service.
Answer: A
Q2) In comparison with a financial statement prepared in conformity with generally accepted accounting principles, a management accounting report is more likely to:
A) Be used by decision makers outside of the business organization.
B) Focus upon the operation results of the most recently completed accounting period.
C) View the entire organization as the reporting entity.
D) Be tailored to the specific needs of an individual decision maker.
Answer: D
Q3) The internal control structure of an organization has no relationship to the reliability of accounting information.
A)True
B)False
Answer: False
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3
Chapter 2: Basic Financial Statements
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Sample Questions
Q1) Which of the following is correct if at the end of Crystal Imports' first year of operations, assets are $800,000 and owners' equity is $720,000?
A) The owner must have invested $720,000 to start the business.
B) The business must be operating profitably.
C) Liabilities are $80,000.
D) Liabilities are $1,520,000.
Answer: C
Q2) The change in owners' equity from one balance sheet to the next is partially explained by the:
A) Statement of cash flows.
B) Statement of financial position.
C) Income statement.
D) Tax return.
Answer: C
Q3) If a company purchases equipment by issuing a note payable, its total assets will not change.
A)True
B)False
Answer: False
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Page 4
Chapter 3: The Accounting Cycle: Capturing Economic Events
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Sample Questions
Q1) Which of the following accounting procedures requires the greatest knowledge of generally accepted accounting principles?
A) Journalizing business transactions.
B) Posting journal entries to ledger accounts.
C) Preparing a trial balance.
D) Locating errors in a trial balance.
Answer: A
Q2) Posting is the process of:
A) Transferring debit and credit entries from the journal into the appropriate ledger accounts.
B) Determining that the dollar amount of debit entries recorded in the ledger is equal to the dollar amount of credit entries.
C) Entering information into a computerized data base.
D) Preparing journal entries to describe each business transaction.
Answer: A
Q3) Dividends are an expense to a corporation and appear on the income statement. A)True
B)False
Answer: False
Page 5
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Chapter 4: The Accounting Cycle: Accruals and Deferrals
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Sample Questions
Q1) The accountant for the Grassroots Company failed to make an adjusting entry to record revenue earned but not yet billed to customers. The effect of this error is:
A) An overstatement of assets and of net income offset by an understatement of owners' equity.
B) An overstatement of net income and an understatement of assets.
C) An understatement of assets, net income, and owners' equity.
D) An overstatement of liabilities offset by an understatement of owners' equity.
Q2) The accountant for Perfect Painting forgot the following two adjustments at the end of 2010: (a) The entry to record depreciation: $3,000.
(b) The entry to record the portion of fees received in advance which have now been earned: $3,000.
As a result of these two omissions:
A) Net income for Perfect Painting for 2010 is overstated.
B) Net income for Perfect Painting for 2010 is understated.
C) Assets of Perfect Painting are overstated at December 31, 2010.
D) Liabilities of Perfect Painting are understated at December 31, 2010.
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Chapter 5: The Accounting Cycle: Reporting Financial Results
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Sample Questions
Q1) Refer to the information above. Income Summary will have what balance before it is closed?
A) $28,640.
B) $15,600.
C) $21,920.
D) $16,640.
Q2) Only two adjustments appear in the adjustments column of a worksheet for Winona Mfg: one to record $8,000 depreciation of factory equipment, and the other to record the use of $1,500 of prepaid insurance. If the Trial Balance column totals are $145,380, what are the totals of the Adjusted Trial Balance columns?
A) $145,380.
B) $153,380.
C) $152,880.
D) $154,880.
Q3) The account, Accumulated Depreciation, is considered a permanent account.
A)True
B)False
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Page 7
Chapter 6: Merchandising Activities
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Sample Questions
Q1) The manager of National Software wants to know how many Microsoft Excel programs the store sold in June. This information is contained in the Inventory controlling account.
A)True
B)False
Q2) Which of the following should not be classified as inventory in the balance sheet of a large automobile dealership?
A) Pickup trucks offered for sale.
B) Used cars taken in trade and offered for sale on the company's used-car lot.
C) Spark plugs, oil filters, and other parts which are intended for use by the service department in repairing and servicing customers' cars.
D) "Company cars" provided to specific company executives for their personal use.
Q3) The Cost of Goods Sold account is closed by:
A) Debiting Cost of Goods Sold and crediting Income Summary.
B) Debiting Cost of Goods Sold and crediting Retained Earnings.
C) Debiting Income Summary and crediting Cost of Goods Sold.
D) Debiting Retained Earnings and crediting Cost of Goods Sold.
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Chapter 7: Financial Assets
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Sample Questions
Q1) Marketable securities are classified into three types; which one is not one of the three types?
A) Available-for-sale.
B) Mark-to-market.
C) Trading.
D) Held-to-maturity.
Q2) The accounts receivable turnover rate for Baldwin Corporation is 8, and for Basinger Company is 10. These statistics indicate that:
A) Basinger collects its accounts receivable within 10 days on average; Baldwin collects its accounts receivable in 8 days on average.
B) Basinger writes off as uncollectible a greater percentage of its accounts receivable than does Baldwin Company.
C) Basinger collects its accounts receivable faster than does Baldwin Company.
D) Basinger makes on average 10 credit sales annually to each of its customers, while Baldwin makes 8 credit sales to each customer.
Q3) The term "financial asset" is synonymous with the term "cash equivalent."
A)True
B)False
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Chapter 8: Inventories and the Cost of Goods Sold
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Sample Questions
Q1) If the terms of a sale are F.O.B. shipping point, the sale should not be recorded until the goods are delivered to the buyer.
A)True
B)False
Q2) In a periodic inventory system, recording a sale on account involves debiting which of the following accounts?
A) Only Accounts Receivable.
B) Accounts Receivable and Inventory.
C) Accounts Receivable and Cost of Goods Sold.
D) Accounts Receivable, Cost of Goods Sold, and Inventory.
Q3) Compute the cost of the ending inventory based on the average-cost method of inventory valuation. (Rounded)
A) $10,590.
B) $11,694.
C) $29,560.
D) $28,450.
Q4) The higher a company's inventory turnover rate, the higher its gross profit.
A)True
B)False
10
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Chapter 9: Plant and Intangible Assets
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Q1) Assume Lloyd uses straight-line depreciation with the half-year convention. Depreciation expense to be recognized in 2009 (the year of purchase) is:
A) $7,400.
B) $8,400.
C) $3,700.
D) Some other amount.
Q2) Which of the following is not a capital expenditure?
A) Advertising expenditures to introduce a new product line.
B) Sales tax paid in conjunction with the purchase of new machinery.
C) Installation of elevators to replace escalators.
D) An amount paid to acquire a patent with a remaining life of only three years.
Q3) Depreciation is a process of asset valuation.
A)True
B)False
Q4) Under the half-year convention, six months' depreciation is recorded on an asset in the year of acquisition and in the year of retirement regardless of the month in which the asset is actually purchased or retired.
A)True
B)False
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Chapter 10: Liabilities
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Sample Questions
Q1) Amortizing a discount on bonds payable:
A) Increases interest expense.
B) Increases periodic cash payments to bondholders.
C) Decreases interest expense.
D) Decreases periodic cash payments to bondholders.
Q2) What is the amount of the interest expense Able will recognize on this note in 2010?
A) $18,000.
B) $31,500.
C) $36,000.
D) $54,000.
Q3) The amount of the present value of a future cash receipt will depend upon:
A) The length of time until the money is received.
B) The amount of money to be received.
C) The required rate of return.
D) The amount of money to be received, the length of time until the money is received, and the required rate of return.
Q4) Social security taxes have a cap on employees' salaries where the tax is ended.
A)True
B)False
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Chapter 11: Stockholders Equity: Paid-In Capital
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Sample Questions
Q1) Refer to the information above. How many shares of common stock are outstanding?
A) 600,000.
B) 606,000.
C) 594,000.
D) 1,000,000.
Q2) The purchase of treasury stock for cash will have which effect upon the following items?
A) Option A
B) Option B
C) Option C
D) Option D
Q3) A 2-for-1 stock split will:
A) Increase the total par value of the stock and increase the number of shares outstanding.
B) Decrease the total par value of the stock and increase the number of shares outstanding.
C) Not change the total par value of the stock and increase the number of shares outstanding.
D) Increase total stockholders' equity.
Q4) The total amount of legal capital: $__________
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Chapter 12: Income and Changes in Retained Earnings
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Sample Questions
Q1) Fuller Mfg.'s financial statements for the current year include the following: Income from continuing operations $663,200
Prior period adjustment (increase in prior-year net income, net of taxes) 180,000
Cash dividends paid to preferred stockholders 196,800
Gain from discontinued operations (net of taxes) 433,600
Extraordinary loss (net of tax benefit) 174,400
On the basis of this information, net income for the current year is:
A) $488,800.
B) $922,400.
C) $725,600.
D) $1,102,400.
Q2) On January 31, 2009, Village Bank had 500,000 shares of $2 par value common stock outstanding. On that date, the company declared a 14% stock dividend when the market price of the stock was $37 per share. The immediate effect of this dividend upon Village Bank was:
A) A reduction in cash of $2,590,000.
B) A reduction in retained earnings of $2,590,000.
C) A reduction in retained earnings of $140,000.
D) A liability to the stockholders of $140,000.
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) The FASB classifies interest received on investments and interest paid on debt financing as part of operating cash flows, while the IASB:
A) Allows interest received to be classified as either operating or investing and interest paid as either operating or financing.
B) Allows interest received to be classified as either operating or financing and interest paid as either operating or investing.
C) Allows interest received to be classified only as investing and interest paid only as financing.
D) Allows interest received to be classified only as financing and interest paid only as investing.
Q2) Dividends paid belong in the operating section of the statement of cash flows. A)True
B)False
Q3) Net cash flow from operating activities for the current year is:
A) $595,875.
B) $596,400.
C) $556,500.
D) $580,125.
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15
Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Income statement classifications
Simon Hardware and Garfunkel Foods are sole proprietorships with similar amounts of total assets. Also, both businesses earn similar amounts of revenue, incur similar amounts of operating expenses, and report similar net incomes. However, Simon has a higher cost of goods sold, while Garfunkel Foods has higher interest expense. Indicate which of these companies has the higher (a) gross profit rate, and (b) return on assets. In each case, explain the reasons for each answer.
Q2) How would a company's working capital be affected if a substantial amount of accounts payable were paid in cash?
A) It would be unaffected.
B) It would fall.
C) It would increase.
D) The change would depend on the relationship between the payables liquidated and current liabilities.
Q3) The debt ratio is computed by dividing total liabilities by current assets.
A)True
B)False
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16
Chapter 15: Global Business and Accounting
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Sample Questions
Q1) In a planned economy, the government uses central planning to allocate resources and determines output among various segments of the economy.
A)True
B)False
Q2) Rochester, Inc. purchased cameras from a Japanese company at a price of 4 million yen. On the purchase date, the exchange rate was $0.0100 per Japanese yen, but when Rochester, Inc., paid the liability, the exchange rate was $0.0103 per yen. When this foreign account payable was paid, Rochester, Inc., recorded a:
A) Debit to Inventory of $1,200.
B) Loss of $1,200.
C) Credit to Accounts Payable of $41,200.
D) Gain of $1,200.
Q3) Consider the following statement: "A strong dollar rose sharply against the British pound, but fell slightly against the Japanese yen." This statement indicates that:
A) The British pound is a stronger currency than the Japanese yen.
B) The exchange rate for the yen, stated in dollars, is rising.
C) The exchange rate for the pound, stated in dollars, is rising.
D) The exchange rate for the yen, stated in pounds, is falling.
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Chapter 16: Management Accounting: a Business Partner
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Sample Questions
Q1) Since manufacturing costs (direct materials, direct labor, and overhead) are incurred in the process of manufacturing units of product, these costs are credited to:
A) The Direct Materials Inventory, Direct Labor, and Manufacturing Overhead accounts respectively.
B) Liability accounts.
C) The Work in Process Inventory account.
D) The Cost of Goods Sold account.
Q2) Product costs are offset against revenue in the period in which the related products are manufactured, rather than the period in which the products are sold.
A)True
B)False
Q3) Which of the following is a period cost?
A) Direct materials used.
B) Direct labor costs applicable to production.
C) Manufacturing overhead.
D) Advertising expense.
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18
Chapter 17: Job Order Cost Systems and Overhead
Allocations
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Sample Questions
Q1) Debits to the Manufacturing Overhead account record:
A) The actual amounts of overhead costs incurred during a period.
B) The amount of overhead applied to production during a period.
C) The amount of overhead incurred on a specific job.
D) All conversion costs of a period.
Q2) A cost driver is an activity base that is highly correlated with manufacturing overhead costs.
A)True
B)False
Q3) When a job is completed:
A) Cost of goods sold is debited.
B) Work-in-process inventory is debited.
C) Finished goods inventory is credited.
D) None of the above.
Q4) The amount of direct materials cost charged to completed jobs during March was:
A) $20,000.
B) $50,000.
C) $30,000.
D) Some other amount.
Page 19
Q5) What is the cost of goods sold during November? $___________
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Chapter 18: Process Costing
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Q1) The unit cost per gallon of soup transferred to the Canning Department during March was:
A) $1.50.
B) $1.62.
C) $1.71.
D) $1.83.
Q2) The number of equivalent full units of production:
A) Is equal to the number of units completed by a department.
B) May not be greater than the number of units completed by a department.
C) Is used to complete the overhead application rate.
D) May be less than, equal to, or greater than the number of physical units completed during the period.
Q3) In a process costing system that uses equivalent full units of production, the per-unit cost of direct materials equals the total cost of materials used in the current month divided by the number of units completed and transferred during the current month.
A)True
B)False
Q4) The unit cost per case of mustard incurred by the Bottling Department in May was $__________.
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Chapter 19: Costing and the Value Chain
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Q1) What are the total internal failure costs for the Abrams Corporation?
A) $38,300.
B) $34,500.
C) $19,700.
D) $35,250.
Q2) Cycle time is the length of time required for a product to pass completely though inspection.
A)True
B)False
Q3) JIT inventory systems strive to:
A) Cultivate long-term relationships with a select group of reliable suppliers.
B) Keep inventories at minimal levels.
C) Improve overall product quality.
D) All of the above.
Q4) Activity-based management is a subset of activity-based costing.
A)True
B)False
Q5) An approach that explicitly monitors quality costs and rewards quality enhancing behavior. ________________________________
Q6) Resourceful's manufacturing efficiency ratio is ___________%.
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Chapter 20: Cost-Volume-Profit Analysis
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Q1) Nanu Corporation manufactures two products; data are shown below: If Nanu's monthly fixed costs average $425,000, what is its break-even point expressed in sales dollars?
A) $1,320,000.
B) $1,250,000.
C) $1,400,000.
D) $990,000.
Q2) Unique Corporation manufactures two products; data are shown below: If Unique's monthly fixed costs average $400,000, what is its break-even point expressed in sales dollars?
A) $1,320,000.
B) $1,250,000.
C) $1,400,000.
D) $1,052,632.
Q3) A company's most profitable products are often those which:
A) Have the highest contribution margin ratios and the highest sales volumes.
B) Have the highest contribution margin ratios and the lowest sales volumes.
C) Have the lowest contribution margin ratios and the highest sales volumes.
D) Have the lowest contribution margin ratios and the lowest sales volumes.
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Page 22
Chapter 21: Incremental Analysis
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Q1) What is the incremental cost of producing each additional motor?
A) $29.
B) $69.
C) $95.
D) Some other amount.
Q2) Products for which sales of one contribute to the sales of another are called:
A) Complementary products.
B) Joint products.
C) Common products.
D) Dependent products.
Q3) Costs that have not yet been incurred and that may vary among different courses of action are called:
A) Opportunity costs.
B) Out-of-pocket costs.
C) Joint costs.
D) Sunk costs.
Q4) Even though costs, revenues, and other factors do not vary among possible courses of action, they may be relevant to a decision.
A)True
B)False
Page 23
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Chapter 22: Responsibility Accounting and Transfer Pricing
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Q1) In a responsibility accounting system, the recording of revenue and costs begins with the:
A) Most profitable segments of the business.
B) Least profitable segments of the business.
C) Broadest areas of managerial responsibility.
D) Smallest areas of managerial responsibility.
Q2) After the closing of Profit Center 3, the monthly income from operations for Profit Center 1, as measured by Dalton Co. should be approximately:
A) $25,000.
B) $17,500.
C) $10,000.
D) $80,000.
Q3) Carrier Corporation's Syracuse plant is organized into Air Conditioning and Heating Products divisions. The management of the Syracuse plant should evaluate the Heating Products division as:
A) A cost center.
B) An investment center.
C) A profit center (other than an investment center).
D) A responsibility center.
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Page 24
Chapter 23: Operational Budgeting
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Q1) Budgeted debt service costs
On April 1, Fisher Corporation borrowed $400,000 from its bank by signing a 9%, 5-year note payable. The note calls for 60 monthly payments of $6,150, which includes both interest and principal components.
(a) Interest expense budgeted for April amounts to: $________________
(b) The carrying value of the note to be reported in the company's budgeted balance sheet as of April 30 is: $________________
(c) Interest expense budgeted for May amounts to (round to nearest whole dollar): $________________
(d) The carrying value of the note to be reported in the company's budgeted balance sheet as of May 31 is (round to nearest whole dollar): $________________
Q2) As budgeted output per the flexible budget increases, per-unit fixed costs (increase/decrease): ___________
Q3) Which of the following is considered a financial budget estimate?
A) The manufacturing cost budget.
B) The cost of goods sold budget.
C) The operating expense budget.
D) The prepayments budget.
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Chapter 24: Standard Cost Systems
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Q1) Smith's actual manufacturing costs for May totaled $72,000, whereas budgeted manufacturing costs (at standard) were $80,000. A comparison of the budgeted costs and actual amounts:
A) Is not significant unless the budgeted and actual figures are based upon the same level of production.
B) Demonstrates that Smith's Manufacturing Department operated very efficiently during May.
C) Indicates that production cost per unit was 10% below budgeted cost per unit.
D) Indicates that Smith produced only 90% of the number of units budgeted for production in May.
Q2) The use of inexpensive, low quality, materials often results in:
A) A favorable materials quantity variance.
B) A favorable labor rate variance.
C) An unfavorable materials quantity variance.
D) An unfavorable materials price variance.
Q3) Matson's labor rate variance for April is:
A) $7,500 unfavorable.
B) $8,000 unfavorable.
C) $4,200 favorable.
D) $3,300 unfavorable.
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Chapter 25: Rewarding Business Performance
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Q1) Accounting systems do not offer any benefit to management in generating and focusing employee motivation.
A)True
B)False
Q2) Which of the following are not part of the components of the DuPont system for measuring and evaluating business performance?
A) Return on sales.
B) Residual income.
C) Return on investment.
D) Capital turnover.
E) Number of patents.
Q3) Clancy Stores has sales of $1,574,000, cost of sales of $653,000, and operating expenses of $292,000. What is Clancy's return on sales?
A) 58.5%.
B) 41.5%.
C) 60%.
D) 40%.
Q4) State the four performance lenses in a balanced scorecard and state at least two measures for each of them.
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Chapter 26: Capital Budgeting
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Q1) A weakness in the usefulness of the return on average investment is that it fails to consider the present value of an investment.
A)True
B)False
Q2) The payback period of this investment is:
A) Four years.
B) Five years.
C) Six years.
D) Over six years.
Q3) Of the following techniques of capital budgeting, which one explicitly incorporates an estimate of an interest rate into the basic computation?
A) Payback method.
B) Average rate of return.
C) Net present value method.
D) Accounting book value method.
Q4) The return on average investment computation ignores the timing of an investment's future cash flows.
A)True
B)False
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Chapter 28: Forms of Business Organization
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Q1) When closing Income Summary, assuming the corporation had net income for the accounting period, the account Retained Earnings is credited.
A)True
B)False
Q2) Grey, Dailey, and Sanders have formed a partnership. Net income for the first year amounted to $50,400. The partnership agreement states that Grey will receive a salary of $10,000, Dailey will receive $15,000, and Sanders will receive $20,000. They each have capital accounts of $30,000, $40,000, and $50,000 respectively. The contract calls for interest of 12% of their beginning capital balances for each partner. Any profit or loss will be split equally. How much income will each partner receive?
Q3) Assets contributed to a partnership by a partner would be recorded at:
A) Historical cost.
B) Fair market value.
C) Cost less depreciation.
D) Potential value.
Q4) Limited personal liability is a characteristic of a sole proprietorship.
A)True
B)False
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Chapter 27: The Time Value of Money: Future Amounts and
Present Values Answer Key
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/78576
Sample Questions
Q1) The present value of a cash amount:
A) Is always less than the future value.
B) Is always more than the future value.
C) Is the same as the future value.
D) Is the same as the actual cash value.
Q2) Annuities may provide equal amounts to an investor at fixed periods of time over the life of an investment.
A)True
B)False
Q3) Compound interest:
A) Is interest only on the principal amount for several years.
B) Is interest on the principal and previously earned interest.
C) Is interest only on previous interest excluding the principal.
D) Is equal to simple interest received for several years.
Q4) The future amount of an annuity is calculated by multiplying the present value of the annuity by its applicable factor from a table.
A)True
B)False
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Q5) Explain what is meant by the "time value of money." Provide examples.
Q6) Explain how compound interest applies to the time value of money.
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