Introduction to Accounting Exam Review
Course Introduction
Introduction to Accounting provides students with a foundational understanding of the principles and practices underpinning the accounting profession. Covering key concepts such as the accounting cycle, double-entry bookkeeping, preparation and interpretation of financial statements, and basic financial analysis, this course emphasizes the role of accounting in business decision-making. Students will gain practical skills in recording transactions, managing accounts, and ensuring the accuracy and integrity of financial information, which are essential for both further study and future careers in business, finance, or entrepreneurship.
Recommended Textbook
College Accounting Chapters 1 to 30 15th Edition by John Price
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Page 2
Chapter 1: Accounting: The Language of Business
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Q1) Accountants normally choose to practice in one of three areas: public accounting, managerial accounting, or ________ accounting.
Answer: governmental
Q2) The Securities and Exchange Commission (SEC)regulates the accounting methods and financial reporting of ________ owned corporations.
Answer: publicly
Q3) The group of accounting educators who offer their opinions about proposed FASB statements, after research has been done to determine the possible effects on financial reporting and the economy, is
A)the FCC.
B)the SEC.
C)the AAA.
D)the AICPA.
Answer: C
Q4) The three major legal forms of business entity are the sole proprietorship, the partnership, and the________.
Answer: corporation
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3
Chapter 2: Analyzing Business Transactions
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Q1) Assets always equal debts of the business plus the financial interest of the owner.
A)True
B)False
Answer: True
Q2) A withdrawal of funds by the owner for personal use is considered a business expense.
A)True
B)False Answer: False
Q3) The Statement of Owner's Equity is calculated as follows:
A)beginning capital + net income - withdrawals + additional investments = ending capital
B)beginning capital + net income + withdrawals + additional investments = ending capital
C)beginning capital + net loss - withdrawals + additional investments = ending capital
D)beginning capital + net loss + withdrawals + additional investments = ending capital
Answer: A
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Chapter 3: Analyzing Business Transactions Using T Accounts
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Q1) The total of the figures on the left side of a Cash account is $36,700. The total of the figures on the right side is $16,250. The balance of this account:
A)is $52,950 and would be recorded on the right side of the account.
B)is $20,450 and would be recorded on the left side of the account.
C)is $52,950 and would be recorded on the left side of the account.
D)is $20,450 and would be recorded on the right side of the account.
Answer: B
Q2) The ABC Company paid cash on account for supplies purchased last month. This would be recorded in the T-accounts as a:
A)debit Supplies and credit Accounts Payable.
B)debit to Accounts Payable and credit Cash.
C)debit Accounts Receivable and credit Cash.
D)debit Cash and credit Supplies.
Answer: B
Q3) A business transaction must affect at least two accounts.
A)True
B)False
Answer: True
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Chapter 4: The General Journal and the General Ledger
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Q1) A journal entry can consist of no more than one account to be debited and one account to be credited.
A)True
B)False
Q2) Anna Conda Landscaping service received a bill for the utilities used during September. The bill will be paid in October. The journal entry to record the utility bill received is:
A)Debit Utilities Expense; Credit Accounts Payable
B)Debit Utilities Expense; Credit Cash
C)Debit Accounts Payable; Credit Cash
D)Debit Cash; Credit Utilities Expense
Q3) The journal entry to record the receipt of cash from credit clients would include:
A)a debit to Cash and a credit to Fees Income.
B)a debit to Cash and a credit to Accounts Receivable.
C)a debit to Accounts Receivable and a credit to Cash.
D)a debit to Fees Income and a credit to Cash.
Q4) The process of recording transactions in a journal is referred to as ________.
Q5) A journal entry containing more than one debit or more than one credit is called a(n)________ entry.
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Chapter 5: Adjustments and the Worksheet
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Q1) Adjusting Entries are:
A)updating entries for previously unrecorded expenses or revenues.
B)corrections of errors.
C)not required.
D)will always affect cash.
Q2) Read the description of following adjustments that are required at the end of the accounting period for AAA Appliance Repair Services. Record the necessary adjusting entries required at the end of January on page 2 of a general journal. Omit the descriptions.
A. Prepaid rent for the year on January 1, 2019. Rent expired during the month of January 2019, $2,000.
B. Purchased supplies for $7,600 on January 1, 2019. Inventory of supplies was $1,600 on January 31, 2019.
C. Depreciation is computed using the straight-line method. Equipment purchased on January 1, 2019, for $15,000 has an estimated useful life of 5 years with no salvage value.
D. Signed a 3-month contract for $600 of prepaid advertising on January 1, 2019.
Q3) Accumulated depreciation is classified as a(n)________ account.
Q4) The account accumulated depreciation has a normal________ balance.
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Chapter 6: Closing Entries and Teh Postclosing Trial Balance
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Q1) After the closing entries are posted to the ledger, each revenue account will have:
A)either a debit or a credit balance.
B)a credit balance.
C)a debit balance.
D)a zero balance.
Q2) The asset, liability, and owner's capital accounts appear on all of the following except the:
A)post-closing trial balance.
B)balance sheet.
C)worksheet.
D)income statement.
Q3) All of the following accounts will appear on the post-closing trial balance except:
A)Capital
B)Depreciation Expense
C)Accounts Payable
D)Land
Q4) After all the closing entries are posted, the ________ account reflects the results of operations for the period.
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Chapter 7: Accounting for Sales and Accounts Receivable
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Q1) A wholesale firm made sales with the following list prices and trade discounts. Calculate the amount the firm will use to record each sale in the sales journal. Show your calculation.
A. List price of $900 and trade discount of 45 percent.
B. List price of $500 and trade discount of 35 percent.
C. List Price of $1,600 and trade discounts of 25 and 15 percent.
Q2) The abbreviation S1 in the Posting Reference column of an account shows that the data was posted from page 1 of the sales journal.
A)True
B)False
Q3) A list of all unpaid balances in the accounts receivable subsidiary ledger is called a(n)________ of accounts receivable.
Q4) A(n)-------- business sells goods that it purchases in finished form for resale.
Q5) A retailer gives an allowance to a customer for damaged merchandise. The entry to record the allowance would include
A)A credit to Sales.
B)a debit to Cash.
C)A debit to Sales Returns and Allowance
D)a debit to Accounts Receivable.
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Chapter 8: Accounting for Purchases and Accounts Payable
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Q1) Purchases returns and allowances are recorded in the ________ journal if a firm does not have a purchases returns and allowances journal.
Q2) On June 30, 2019, the general ledger of the Shoe Closet, a retail store, showed the following balances: Purchases $19,000; Freight In, $500; Purchases Returns and Allowances, $900.
Determine the following:
A)What was the delivered cost of purchases for June?
B)What was the net delivered cost of purchases for June?
Q3) Which of the following statements is not correct?
A)Cash purchases of merchandise are not recorded in the purchases journal.
B)The Purchases account has a normal debit balance.
C)The invoice date and credit terms must be carefully recorded in the purchases journal because they determine when payment is due.
D)A credit purchase of equipment for use in the business would be recorded in the purchases journal.
Q4) The entry to record a return of merchandise purchased on credit includes a debit to the________ account in the general ledger.
Q5) Purchases of merchandise on credit should be recorded in the ________ journal.
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Chapter 9: Cash Receipts, Cash Payments, and Banking Procedures
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Sample Questions
Q1) Identify the procedure below that is <u><b>NOT</u></b> essential for proper control over cash payments.
A)Make all payments out of a petty cash fund or a travel and entertainment fund.
B)Use prenumbered checks.
C)Enter all cash payments promptly in the accounting records.
D)Have only designated personnel approve bills and invoices before they are paid.
Q2) A service charge charged by the bank.
A)Option A
B)Option B
C)Option C
D)Option D
Q3) To arrive at an accurate balance on a bank reconciliation statement, deposits in transit should be:
A)deducted from the bank statement balance.
B)added to the book balance.
C)added to the bank statement balance.
D)deducted from the book balance.
Q4) A(n)________ is a written promise to pay a specified amount of money at a specified time.
11
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Chapter 10: Payroll Computations, Records, and Payment
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Q1) Which of the following statements is not correct?
A)The SUTA tax protects employees against losses from job-related injuries or illnesses.
B)The FUTA tax provides benefits for employees who become unemployed.
C)The federal unemployment tax rate can be reduced by the rate charged by state for the state unemployment tax.
D)The earnings base for the federal and state unemployment taxes are the same, the first $7,000 of an employee's earnings for the year.
Q2) Social Security taxes are paid by:
A)the employer and federal government.
B)employees only.
C)only by the employer.
D)both the employee and employer.
Q3) Salespeople who are paid a percentage of net sales are paid on a(n)
A)salary basis.
B)hourly-rate basis.
C)commission basis
D)piece-rate basis.
Q4) The amount of employees' ________ is recorded in the Wages Expense account.
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Page 12
Chapter 11: Payroll Taxes, Deposits, and Reports
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Q1) The payroll register of Vtech Enterprises showed total employee earnings of $2,100 for the week ended August 2, 2019. Compute the employer's payroll taxes for the period. The tax rates are: <b>Social security</b> tax, 6.2 percent; <b>Medicare</b> tax, 1.45 percent;<b> FUTA </b>tax, 0.6 percent; <b>SUTA</b> tax, 2.2 percent. All earnings are taxable. Record the employer's payroll taxes for the period on page 4 of a general journal.
Q2) The entry to record a deposit of federal income taxes withheld and social security and Medicare taxes, would include a
A)debit one or more liability accounts and credit an asset account.
B)debit one or more expense accounts and credit one or more liability accounts. C)debit an expense account and credit one or more liability accounts.
D)debit an asset account and credit an expense account.
Q3) Beachside Manufacturing estimates that its office employees will earn $54,000 next year and its factory employees will earn $280,000. The firm pays the following rates for workers' compensation insurance: $0.40 per $100 of wages for the office employees and $4.10 per $100 of wages for the factory employees. Compute the estimated premiums for the office and factory employees.
Q4) Form 940 must be filed________time(s)a year.
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Page 13
Chapter 12: Accruals, Deferrals, and the Worksheet
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Q1) Under a periodic inventory system, the adjustment for merchandise inventory is made in ________ steps.
Q2) After both of the entries for the inventory adjustment have been posted, the debit in the Income Summary account represents:
A)Beginning Inventory
B)Cost of Goods Sold
C)Ending Inventory
D)Net Income
Q3) Determine the account and amount to be debited and the account and amount to be credited for the following adjustment. Equipment purchased for $104,000 on January 3, 2019, has an estimated life of 5 years and an estimated salvage value of $9,000. The firm uses the straight-line method of depreciation. Determine the adjustment for the month ended January 31, 2019.
Q4) Determine the account and amount to be debited and the account and amount to be credited for the following adjustment. The company uses the periodic inventory system. The beginning inventory for a merchandising business was $73,000, and the ending inventory is $66,000.
Q5) Uncollectible Accounts Expense is a(n)________ account.
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Chapter 13: Financial Statements and Closing Procedures
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Q1) When a firm experiences a net loss, the owner's capital is decreased.
A)True
B)False
Q2) Which of the following should be classified as a General and Administrative Expense on a Multi-Step Income Statement:
A)Delivery Expense
B)Sales Salaries Expense
C)Advertising Expense
D)Insurance Expense
Q3) Which of the following would not be classified as a Current Asset:
A)Cash
B)Accounts Receivable
C)Equipment
D)Supplies
Q4) The difference between net sales and the cost of goods sold is called the ________ on sales.
Q5) Each reversing entry is the exact opposite of the related________ entry.
Q6) Jeannine Coulson is the owner of a book store. During the year she made withdrawals of cash totaling $9,000. What accounts are debited and credited to close the owner's drawing account?
Page 15
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Chapter 14: Accounting Principles and Reporting Standards
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Q1) The separate entity assumption permits businesses to record property and equipment as assets that will provide benefits in future periods.
A)True
B)False
Q2) The financial statements in the annual report of a corporation contain footnotes explaining the methods used to depreciate the firm's equipment. This practice is an example of
A)the accrual principle.
B)the consistency principle.
C)the conservatism constraint.
D)the full disclosure principle.
Q3) Hour Place Clock Repair paid $2,580 cash in advance for a one year insurance policy. According to the matching principle, if 3 months of the policy has expired by the end of the current fiscal year, how much should Hour Place Clock Repair report as Insurance Expense on the Income Statement?
A)$2,580
B)$5,805
C)$215
D)$645
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Page 16
Chapter 15: Accounts Receivable and Uncollectible Accounts
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Q1) On December 31, 2019, prior to adjustments, Accounts Receivable has a debit balance of $256,000 and the Allowance for Doubtful Accounts has a credit balance of $1,600. The firm estimates its losses from uncollectible accounts to be 5% of accounts receivable at the end of the year. The amount of the adjusting entry needed to record the estimated losses from uncollectible accounts is:
A)$12,800
B)$14,400
C)$12,100
D)$11,200
Q2) The practice of estimating losses from uncollectible accounts before specific accounts become uncollectible is referred to as the ________ method.
Q3) Allowance for Doubtful Accounts has a credit balance of $1,000 immediately before the write-off of a $300 account receivable. The balance of Allowance for Doubtful Accounts immediately after the write-off is
A)$1,300 credit.
B)$700 credit.
C)$300 debit.
D)$700 debit.
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Chapter 16: Notes Payable and Notes Receivable
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Q1) Identify the 5 requirements necessary for a promissory note to be considered a "negotiable instrument".
Q2) When a note receivable is discounted, the net proceeds are computed by subtracting the discount charges from the-------- of the note.
Q3) Compute the amount of interest owed on a 7-month, 6 percent note for $15,000.
Q4) Compute the maturity value of a 180-day, 9 percent note with a face value of $11,000.
Q5) The due date of a 60-day note dated October 15, is
A)December 12.
B)December 13.
C)December 14.
D)December 16.
Q6) If a note payable overlaps financial reporting periods (years), Interest Expense is recorded only in the year the note is paid.
A)True
B)False
Q7) Explain when and why the Notes Receivable Discounted account is used.
Q8) Compute the maturity value of a 30-day, 8 percent note with a face value of $6,000.
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Chapter 17: Merchandise Inventory
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Q1) The use of the LIFO method of inventory valuation
A)assigns the cost of the most recent purchases to the ending inventory.
B)results in the same valuation as the specific identification method in a time of rising prices.
C)results in the lowest reported net income in a time of rising prices.
D)results in the highest reported net income in a time of rising prices.
Q2) Specific identification is an inventory costing method used to value inventory where the merchandise identified as sold or on hand is typically a high-priced or one-of-a-kind item.
A)True
B)False
Q3) Which of the following inventory costing procedures requires a physical count of merchandise a minimum of once a year at year end?
A)the Last-in-first-out method
B)the average cost method
C)the First-in-first-out method
D)a physical count at a minimum of once a year is required for all inventory costing procedures
Q4) The lower the ending inventory valuation, the--------- the reported net income.
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Chapter 18: Property, Plant, and Equipment
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Q1) A firm purchases an asset for $60,000 and estimates that it will have a useful life of five years and a salvage value of $5,000. Under the straight-line method, the balance in the accumulated depreciation account, after the second year, will be:
A)$12,000.
B)$24,000.
C)$11,000.
D)$22,000.
Q2) Real property includes land, land improvements, buildings and other structures attached to the land.
A)True
B)False
Q3) The allocation of the acquisition cost of an intangible asset to expense during its estimated useful life is called----------- .
Q4) The acquisition cost of an intangible asset should be charged to expense over the shorter of its legal or useful life, whichever is shorter.
A)True
B)False
Q5) The normal balance of Accumulated Depreciation is a(n)----------- .
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Chapter 19: Accounting for Partnerships
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Q1) Federal income tax is levied on
A)a partnership based on its total net income when earned.
B)the partnership at the end of the fiscal period.
C)the partners only when they withdraw earnings from the partnership for personal use.
D)the partners for their individual shares of the reported partnership income.
Q2) Norma and Marilyn are partners. The partnership agreement provides that Norma will receive a salary of $36,000 and Marilyn will receive a salary of $58,000. These salaries were paid to the partners during 2019 and were charged to the partners' drawing accounts. Both partners also receive 8 percent on their capital balances at the beginning of the year. The balance of any remaining profits or losses is divided equally. The beginning capital account balances for 2019 were Norma, $80,000, and Marilyn, $40,000. At the end of the year, the partnership has a net income of $110,000.
1. What amount of net income or loss will be allocated to Norma?
2. What amount of net income or loss will be allocated to Marilyn?
Q3) The financial statement that shows the division of profits and losses among partners is the --------.
Q4) Identify and discuss the key characteristics of partnerships and partner agreements.
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21
Chapter 20: Corporations: Formation and Capital Stock Transactions
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Q1) If a corporation sells 700 shares of 8 percent, $80 par-value preferred stock for $96 a share, the entry to record the transaction will include a credit of------------- to the Preferred Stock account.
Q2) Stock is issued to investors at the time they sign the stock subscription contract.
A)True B)False
Q3) Which of the following statements is correct?
A)Shareholders have personal liability for a corporation's debts.
B)Shareholders must obtain the consent of other shareholders to sell their shares or buy more shares.
C)Limited liability partnership (LLP)partners have liability for their own actions and the actions of those under their control or supervision.
D)Shareholders are legally prohibited from acting as an officer or employee of a corporation.
Q4) Common stock can be converted to preferred stock at the shareholder's discretion. A)True B)False
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Chapter 21: Corporate Earnings and Capital Transactions
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Q1) Declarations of cash dividends and stock dividends are debited to the Retained Earnings account.
A)True B)False
Q2) To be entitled to receive a cash dividend, an investor must be listed as an owner of the stock on the----------date.
Q3) A corporation paid estimated income taxes of $52,100 during 2019. At the end of the year, the corporation's tax bill is computed to be $57,500. Record the entry to adjust the Income Tax Expense account on page 6 of a general journal. Omit the description.
Q4) When a corporation reacquires stock that it previously issued and intends to reissue at a later date, the------------ account is debited.
Q5) An appropriation of retained earnings reduces the amount of retained earnings available for dividend declarations.
A)True B)False
Q6) When a previously declared stock dividend is distributed, the journal entry is to debit Common Stock Dividend Distributable and credit---------- .
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Chapter 22: Long-Term Bonds
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Q1) The face interest is the contractual interest specified on the bond.
A)True
B)False
Q2) Bonds on which a corporation has pledged property to guarantee payment to the bondholders are known as---------- bonds.
Q3) To calculate the gain or loss on the retirement of bonds, the carrying value of the bonds is subtracted from the repurchase price.
A)True
B)False
Q4) Corporations with many bondholders will open a separate checking account because
A)it is required by law.
B)the account earns interest.
C)it is easier to do the bookkeeping on the bond interest.
D)it keeps the bond interest records separate for tax purposes.
Q5) Bond interest expense usually appears in the-------------section of the income statement.
Q6) Compare convertible and callable bonds by listing their characteristics in the following format.
Convertible Bonds Callable Bonds
Page 24
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Chapter 23: Financial Statement Analysis
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Q1) A decrease in cost of goods sold from 46.5% to 45.0% from year 1 to year 2 indicates a favorable long-term trend.
A)True
B)False
Q2) Where the current ratio measures a company's ability to pay its current debts using current assets on a dollar for dollar basis, working capital provides a similar measure by providing the actual margin of security afforded to short-term creditors.
A)True
B)False
Q3) A vertical analysis of the income statement calculates each income statement item as a percentage of -----------as reported on that income statement.
Q4) The excess of current assets minus current liabilities is known as----------- .
Q5) Using the information given, analyze the liquidity of Quotidian Industries for 2020.
Q6) Using the information given, analyze the financial strength of Sybaritic Corporation for 2020.
Q7) The----------- on total assets measures the earnings on the assets used by a company.
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Chapter 24: The Statement of Cash Flows
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Q1) The cash received from issuing common stock is not reported on the statement of cash flows.
A)True
B)False
Q2) Information from Zwatsch Company's income statement is as follows: net income
$32,000, depreciation expense $5,200; loss on sale of plant assets $1,600; gain on retirement of bonds
$10,000; an increase in accounts receivable of $4,200 and dividend payments of $4,400. The net cash provided by operating activities is:
A)$24,600.
B)$20,200.
C)$49,800.
D)$41,400.
Q3) A gain on the sale of equipment is reported in the -------------section of the statement of cash flows.
Q4) The purchase of treasury stock is treated as a cash outflow in the-----------section of the statement of cash flows.
Q5) Why is the Statement of Cash Flows important?
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Chapter 25: Departmentalized Profit and Cost Centers
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Q1) Recording Studio
A)Cost
B)Profit
Q2) Income from operations provides a better measure for determining whether a segment or department should be discontinued over contribution margin of the segment or department.
A)True
B)False
Q3) Purchasing & Receiving
A)Cost
B)Profit
Q4) Eliminating a department should eliminate all --------------expenses of the department.
Q5) Interest income and interest expense are treated as direct costs and are traced to departments or business segments.
A)True
B)False
Q6) The difference between a department's gross profit on sales and its direct expenses is the----------.
Q7) When total revenues equal total expenses, a business is said to----------- .
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Chapter 26: Accounting for Manufacturing Activities
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Q1) Six adjusting entries are made at the end of the fiscal year for inventory accounts in a manufacturing operation.
A)True
B)False
Q2) Reversing entries are required by:
A)the Internal Revenue Service.
B)Generally Accepted Accounting Principles.
C)the International Accounting Standards Board.
D)none of these.
Q3) The three components of total manufacturing cost are:
A)cost of goods manufactured, cost of goods sold, and work in process.
B)raw materials, direct labor, and cost of goods sold.
C)selling expenses, administrative expenses, and manufacturing overhead.
D)raw materials, direct labor, and manufacturing overhead.
Q4) The ending inventory of raw materials is shown on the worksheet of a manufacturing business in the Cost of Goods Manufactured ----------column.
Q5) The above listed items are used by Paige Manufacturing to make dollhouses. Categorize each as Direct Materials (DM), Direct Labor (DL), or Manufacturing Overhead (MOH).
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Chapter 27: Job Order Cost Accounting
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Q1) Job Z2 requires $1,350 of material, $100 of which is indirect material. If manufacturing overhead is applied at a rate of 150% of direct labor cost and there were 232 labor hours charged to Job Z2 at $13 an hour, the total cost of Job Z2 would be:
A)$8,890.
B)$8,790.
C)$4,366.
D)$6,549.
Q2) The process cost accounting system is used when homogenous products are manufactured in a continuous process.
A)True
B)False
Q3) A(n)----------accounting system allows a firm to compare its budgeted costs with its actual costs in order to evaluate efficiency.
Q4) Workers who perform direct labor prepare a series of------------ to account for all time spent in the plant.
Q5) A worker completes a(n)----------for each job indicating the job performed and the corresponding starting and stopping time.
Q6) Record the necessary entries on page 8 of a general journal. Omit descriptions.
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Chapter 28: Process Cost Accounting
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Q1) What is the cost of the completed units?
A)$11,984.
B)$12,384.
C)$21,672.
D)$14,280.
Q2) On a cost of production report, the total of the costs of products transferred out of a department and the cost of the ending work in process still in the department must equal the cumulative total cost for the department.
A)True
B)False
Q3) Compute the total cost of a completed unit.
A)$12.50.
B)$12.60.
C)$11.64.
D)$12.00.
Q4) Equivalent production units may be computed
A)for labor only.
B)for labor and materials only.
C)for materials and manufacturing overhead only.
D)for labor, materials, and manufacturing overhead.
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Chapter 29: Controlling Manufacturing Costs: Standard Costs
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Q1) The purchasing department can determine the standard quantity per unit of each type of raw material required to manufacture a product.
A)True
B)False
Q2) If a price variance for materials is unfavorable, the quantity variance for materials also must be unfavorable.
A)True
B)False
Q3) If the actual cost of an item is lower than the standard cost, a(n)-----------price variance will be recognized.
Q4) A fixed budget is one that shows only one level of activity.
A)True
B)False
Q5) To measure manufacturing efficiency, it is necessary to first identify costs behavior and separate cost into their behavioral components.
A)True
B)False
Q6) Costs in excess of established standards are----------- .
Page 31
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Chapter 30: Cost-Revenue Analysis for Decision Making
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Q1) The difference in net income reported under direct costing versus the net income reported under absorption costing is calculated based on the increase or decrease in the units available for sale.
A)True
B)False
Q2) The direct costing procedure is sometimes referred to as variable costing.
A)True
B)False
Q3) Assuming beginning inventory cost per unit is not different than ending inventory cost, the value of the ending inventory under absorption costing is:
A)$60,000
B)$63,000
C)$46,000
D)$40,000
Q4) Earnings or potential benefits foregone because a certain course of action is taken are called-------------costs.
Q5) The difference in cost between two alternatives is called a(n)------------cost.
Q6) The difference between revenue and variable costs is referred to as the---------------- .
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