Intermediate Accounting
Pre-Test Questions
Course Introduction
Intermediate Accounting builds on foundational accounting principles by delving deeper into the recognition, measurement, and reporting of assets, liabilities, equity, revenues, and expenses. The course emphasizes the application of generally accepted accounting principles (GAAP) to complex business transactions, such as revenue recognition, stockholder equity transactions, investments, income taxes, and leases. Students will develop analytical and problem-solving skills necessary for interpreting financial statements, understanding corporate disclosures, and making informed financial decisions. Through a combination of theory, real-world case studies, and practical exercises, this course prepares students for advanced accounting coursework and professional practice.
Recommended Textbook
Corporate Financial Accounting 12th Edition by Carl
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Page 2
S. Warren
Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) Which of the following is not an asset?
A)investment
B)cash
C)inventory
D)stockholder's equity
Answer: D
Q2) The year-end balance of the retained earnings account appears in
A)both the retained earnings statement and the income statement
B)only the retained earnings statement
C)both the retained earnings statement and the balance sheet
D)both the retained earnings statement and the statement of cash flows
Answer: C
Q3) The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time,such as a month or year,is called a(n)
A)prior period statement
B)retained earnings statement
C)income statement
D)balance sheet
Answer: C
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Page 3
Chapter 2: Analyzing Transactions
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Sample Questions
Q1) Which of the following errors would cause the trial balance totals to be unequal?
A)A transaction was not posted.
B)A payment of $67 for insurance was posted as a debit of $76 to Prepaid Insurance and a credit of $76 to Cash.
C)A payment of $4,450 to a creditor was posted as a debit of $4,500 to Accounts Payable and a credit of $450 to Accounts Receivable.
D)Cash received from customers on account was posted as a debit of $720 to Cash and a credit of $720 to Accounts Payable.
Answer: C
Q2) Which of the following groups of accounts have a normal debit balance?
A)revenues,liabilities
B)assets,liabilities
C)liabilities,expenses
D)assets,expenses
Answer: D
Q3) Prepare a journal entry on October 12 for the fees earned on account,$14,600.
Answer: 11ea906a_d1c4_575a_aec7_59d824a6a683_TB2051_00
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Page 4
Chapter 3: The Adjusting Process
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Sample Questions
Q1) At the end of April,the first month of the year,the usual adjusting entry transferring rent earned to a revenue account from the unearned rent account was omitted.Indicate which items will be incorrectly stated,because of the error,on (a)the income statement for April and (b)the balance sheet as of April 30.Also indicate whether the items in error will be overstated or understated.
Answer: 11ea906a_d1cd_a695_aec7_2dc8419cb734_TB2051_00
Q2) Prepaid expenses are eventually expected to
A)become expenses when their future economic value expires.
B)become revenues when services are performed.
C)become expenses in the period when they are paid.
D)become revenues when the liability is no longer owed.
Answer: A
Q3) Prepaid advertising,representing payment for the next quarter,would be reported on the balance sheet as a(n)
A)asset
B)liability
C)contra asset
D)expense
Answer: A
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Page 5
Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Which of the items below does not appear on the work sheet?
A)adjusting entries
B)the unadjusted trial balance
C)closing entries
D)the dividends account
Q2) Which of the following account groups are all considered nominal accounts?
A)Cash,Retained Earnings,Wages Payable
B)Prepaid Insurance,Property,Plant & Equipment,Fees Earned
C)Capital Stock,Dividends,Income Summary
D)Rent Revenue,Fees Earned,Miscellaneous Expense
Q3) The following are steps to the accounting cycle.Of the following,which step should be done first?
A)Closing entries are journalized and posted to the ledger.
B)Transactions are posted to the ledger.
C)Adjusting entries are journalized and posted to the ledger.
D)Financial statements are prepared.
Q4) Explain the differences between a nonclassified balance sheet and a classified balance sheet.
Q5) Explain how net income or loss is determined by using the work sheet.
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Chapter 5: Accounting for Merchandising Businesses
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Sample Questions
Q1) Merchandise Inventory normally has a debit balance.
A)True
B)False
Q2) When the three sections of a balance sheet are presented on a page in a downward sequence,it is called the
A)account form
B)comparative form
C)horizontal form
D)report form
Q3) Under the periodic inventory system,the cost of merchandise sold is equal to the beginning merchandise inventory plus the cost of merchandise purchased plus the ending merchandise inventory.
A)True
B)False
Q4) Sales Returns and Allowances is a contra-revenue account.
A)True
B)False
Q5) On March 29th,customers who owe $10,500.00 for purchases made on Sonic Sales Company submit payments of $4,250.00.Journalize this event.
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Chapter 6: Inventories
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Sample Questions
Q1) When merchandise inventory is shown on the balance sheet,both the method of determining the cost of the inventory and the method of valuing the inventory should be shown.
A)True
B)False
Q2) Under the periodic inventory system,a physical inventory is taken to determine the cost of the inventory on hand and the cost of the merchandise sold.
A)True
B)False
Q3) A subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.
A)True
B)False
Q4) A business using the retail method of inventory costing determines that merchandise inventory at retail is $2,300,000.If the ratio of cost to retail price is 55%,what is the amount of inventory to be reported on the financial statements?
Q5) List three different security measures taken by stores to safeguard inventory.
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Chapter 7: Sarbanes-Oxley, internal Control, and Cash
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Sample Questions
Q1) The notification accompanying a check that indicates the specific invoice being paid is called a
A)remittance advice
B)voucher
C)debit memo
D)credit memo
Q2) You began your new job as the accountant for Morton Company.You were surprised to find that the company had a $2,000 petty cash fund,which sits in the break room.The President of the company told you: "Our petty cash system here works quite smoothly.Since everyone is honest here,everyone has access to the fund for incidentals that might pop up in the course of the business day.Most of these situations don't have any receipts tied to them,so I just put the money back in the fund when my secretary tells me that we have run out and debit the amount to Miscellaneous Expense." Required:
(a)Should you implement some controls on petty cash? Why?
(b)If so,what controls could be used for petty cash?
Q3) Why would a bank require a company to maintain a compensating balance?
Q4) Distinguish preventive controls from detective controls and give examples of each as they relate to cash.
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Chapter 8: Receivables
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Sample Questions
Q1) The balance of the Allowance for Doubtful Accounts is added to Accounts Receivable on the balance sheet.
A)True
B)False
Q2) What is the type of account and normal balance of Allowance for Doubtful Accounts?
A)Contra asset,credit
B)Asset,debit
C)Asset,credit
D)Contra asset,debit
Q3) If the allowance method of accounting for uncollectible receivables is used,what general ledger account is debited to write off a customer's account as uncollectible?
A)Uncollectible Accounts Expense
B)Allowance for Doubtful Accounts
C)Accounts Receivable
D)Interest Expense
Q4) Notes Receivable and Accounts Receivable can also be called trade receivables.
A)True B)False
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Chapter 9: Fixed Assets and Intangible Assets
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Sample Questions
Q1) Land acquired so it can be resold in the future is listed in the balance sheet as a(n)
A)fixed asset
B)current asset
C)investment
D)intangible asset
Q2) Expected useful life is
A)calculated when the asset is sold.
B)estimated at the time that the asset is placed in service.
C)determined each year that the depreciation calculation is made.
D)none of the answers are correct.
Q3) The calculation for annual depreciation using the straight-line depreciation method is
A)initial cost / estimated useful life
B)depreciable cost / estimated useful life
C)depreciable cost * estimated useful life
D)initial cost * estimated useful life
Q4) Comment on the validity of the following statements."As an asset loses its ability to provide services,cash needs to be set aside to replace it.Depreciation accomplishes this goal."
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Chapter 10: Current Liabilities and Payroll
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Sample Questions
Q1) Employers are required to compute and report payroll taxes on a calendar-year basis,even if a different fiscal year is used for financial reporting and income tax purposes.
A)True
B)False
Q2) During the first year of operations,employees earned vacation pay of $35,000.The vacations will be taken during the second year.The vacation pay expense should be recorded in the second year as the vacations are taken by the employees.
A)True
B)False
Q3) Another name for the quick ratio is
A)quick cash ratio
B)current ratio
C)working capital ratio
D)acid-test ratio
Q4) The proceeds of a discounted note are equal to the face value of the note.
A)True
B)False
Q5) List five internal controls that relate directly to payroll.
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Chapter 11: Corporations: Organization, stock Transactions, and Dividends
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Sample Questions
Q1) Treasury stock that had been purchased for $5,600 last month was reissued this month for $8,500.The journal entry to record the reissuance would include a credit to
A)Treasury Stock for $8,500
B)Paid-In Capital from Treasury Stock for $8,500
C)Paid-In Capital in Excess of Par/Common for $2,900
D)Paid-In Capital from Treasury Stock for $2,900
Q2) For accounting purposes,stated value is treated the same way as par value.
A)True B)False
Q3) A corporation has 10,000 shares of $100 par value stock outstanding.If the corporation issues a 5-for-1 stock split,the number of shares outstanding after the split will be 40,000.
A)True
B)False
Q4) The balance in Retained Earnings should be interpreted as representing surplus cash left over for dividends.
A)True
B)False
Page 13
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Chapter 12: Long-Term Liabilities: Bonds and Notes
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Q1) If $500,000 of 10-year bonds,with interest payable semiannually,are sold for $494,040 based on (1)the present value of $500,000 due in 20 periods at 5% plus (2)the present value of twenty,$25,000 payments at 5%,the nominal or contract rate and the market rate of interest for the bonds are both 10%.
A)True
B)False
Q2) If $1,000,000 of 8% bonds are issued at 103 1/2,the amount of cash received from the sale is
A)$1,080,000
B)$965,000
C)$1,000,000
D)$1,035,000
Q3) The price of a bond is equal to the sum of the interest payments and the face amount of the bonds.
A)True
B)False
Q4) A bond is usually divided into a number of individual bonds of $500 each.
A)True
B)False
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Chapter 13: Investments and Fair Value Accounting
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Sample Questions
Q1) Held to maturity securities
A)are reported at fair market value
B)include stocks as well as bonds
C)may be reported as current or noncurrent assets
D)all of the above
Q2) What is comprehensive income? How is it calculated? What are some examples of items included in other comprehensive income? Where is comprehensive income reported?
Q3) The cumulative effects of other comprehensive income items must be reported separately from retained earnings and paid-in capital,on the balance sheet,as accumulated other comprehensive income.
A)True
B)False
Q4) Although marketable securities may be retained for several years,they continue to be classified as temporary,provided they are readily marketable and can be sold for cash at any time.
A)True
B)False
Q5) (1)Discuss factors contributing to the trend to fair value accounting.
(2)What are some of the disadvantages associated with using fair value?
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is emphasized.
A)True
B)False
Q2) Cash flows from investing activities,as part of the statement of cash flows,include payments for the purchase of treasury stock.
A)True
B)False
Q3) Cash receipts received from the issuance of a mortgage notes payable would be classified as
A)investing activities.
B)operating activities.
C)either financing or investing activities.
D)financing activities.
Q4) A cash flow per share amount should be reported on the statement of cash flows. A)True
B)False
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) Which of the following is not included in the computation of the quick ratio?
A)inventory
B)marketable securities
C)accounts receivable
D)cash
Q2) If a company has issued only one class of stock,the earnings per share are determined by dividing net income plus interest expense by the number of shares outstanding.
A)True
B)False
Q3) Leveraging implies that a company
A)contains debt financing.
B)contains equity financing.
C)has a high current ratio.
D)has a high earnings per share.
Q4) Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in comparing such amounts with industry figures.
A)True
B)False
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