Introduction to Accounting Final
Test Solutions
Course Introduction
Introduction to Accounting provides students with a foundational understanding of the principles and practices that underpin financial recordkeeping and reporting. The course covers essential topics such as the accounting cycle, double-entry bookkeeping, preparation and analysis of financial statements, and the role of accounting in decision-making for businesses and organizations. Emphasis is placed on understanding key concepts like assets, liabilities, equity, revenues, and expenses, as well as the use of accounting information in the planning, control, and evaluation of business activities. Through practical exercises and real-world examples, students gain the skills necessary to interpret financial data and develop a solid base for advanced accounting studies.
Recommended Textbook
Financial And Managerial Accounting Principles International Edition 9th Edition by Crosson
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Page 2
Chapter 1: Uses of Accounting Information and the Financial Statements
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Sample Questions
Q1) Fraudulent financial reporting can result from the misapplication of accounting principles.
A)True
B)False Answer: True
Q2) Cash is another term for retained earnings.
A)True
B)False Answer: False
Q3) Responsibility for ethical financial reporting rests solely with the accountant.
A)True
B)False
Answer: False
Q4) Accountants consider money the common unit of measure for all business transactions.
A)True
B)False
Answer: True
Page 3
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Chapter 2: Analyzing Business Transactions
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Sample Questions
Q1) Which of the following accounts should be credited in a journal entry?
A) Dividends, when it has been increased
B) Accounts Receivable, when it has been decreased
C) Wages Expense, when it has been increased
D) Wages Payable, when it has been decreased
Answer: B
Q2) When a business erroneously records expenses as assets,it has violated the measurement issue of
A) communication.
B) classification.
C) valuation.
D) recognition.
Answer: B
Q3) Journal entries are typically posted only at the end of the year.
A)True
B)False
Answer: False
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Chapter 3: Measuring Business Income
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Sample Questions
Q1) Prepaid Rent was $400 at the end of May and $650 at the end of June.Rent Expense for June was $260.How much cash was paid for rent during June?
A) $310
B) $410
C) $510
D) $610 Answer: C
Q2) A cash payment that reduces a liability does not result in an expense.
A)True
B)False Answer: True
Q3) Which of the following accounts is a real account?
A) Interest Expense
B) Building
C) Service Revenue
D) Depreciation Expense-Building Answer: B
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Page 5
Chapter 3: Supplement - Closing Entries and the Work Sheet
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Sample Questions
Q1) Prepare closing entries for December from the following Income Statement columns of the work sheet of Custom Cleaning Service,Inc.,assuming that a $500 dividend was paid during the period (omit explanations).
\(\begin{array} { | l | r | r | }
\hline & { \text { Income Statement } } \\
\hline & { \text { Debit } } &{ \text { Credit } } \\
\hline \text { Cleaning Revenue } & & 2,600 \\
\hline \text { Wages Expense } & 1,200 & \\
\hline \text { Rent Expense } & 400 & \\
\hline \text { Supplies Expense } & 300 & \\
\hline \text { Income Taxes Expense } & 40 & \\
\hline & 1,940 & 2,600 \\
\text { Net Income } & 660 & \\
\hline & 2,600 & 2,600 \\
\hline
\end{array}\)
Q2) The process of crossfooting requires vertical addition and subtraction.
A)True
B)False
Page 6
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Chapter 4: Financial Reporting and Analysis
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Sample Questions
Q1) Sales returns and allowances are deducted from gross sales on the balance sheet.
A)True
B)False
Q2) An advantage of the single-step income statement over the multistep form is
A) the amount of information it provides.
B) its simplicity.
C) its comprehensiveness.
D) its use in computing ratios.
Q3) Distinguish between cost of goods sold and operating expenses,describing the nature of these two items and their placement on the income statement.
Q4) The lower-of-cost-or-market method of accounting for inventories follows the convention of A) full disclosure.
B) materiality.
C) conservatism.
D) cost-benefit.
Q5) Freight paid on goods shipped to customers is classified as a selling expense. A)True
B)False
Q6) State the definition of a current asset.
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Chapter 5: The Operating Cycle and Merchandising Operations
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Sample Questions
Q1) Under the perpetual inventory system,in addition to making the entry to record a sales return,a company would
A) increase Merchandise Inventory and decrease Cost of Goods Sold.
B) increase Cost of Goods Sold and decrease Purchases.
C) increase Cost of Goods Sold and decrease Merchandise Inventory.
D) make no additional entry until the end of the period.
Q2) Which of the following is not a goal of a system of internal control over merchandising transactions?
A) Prevent the theft of cash and inventory.
B) Keep enough cash on hand to take advantage of purchase discounts.
C) Keep the maximum amount of inventory on hand at all times.
D) Keep credit losses as low as possible.
Q3) Which of the following documents is prepared by to a company's accounting department?
A) Receiving report
B) Check authorization
C) Bank statement
D) Invoice
Q4) Why is the separation of duties an important control activity in a good system of internal control?
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Chapter 6: Inventories
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Sample Questions
Q1) Inventory turnover is a measure expressed in terms of a percentage.
A)True
B)False
Q2) The portion of cost of goods available for sale that is not assigned to ending inventory is assigned to cost of goods sold.
A)True
B)False
Q3) Realizable value is the amount for which an inventory item can be resold.
A)True
B)False
Q4) The determination of the balance sheet cost of merchandise inventory is important to the determination of net income.
A)True
B)False
Q5) The LIFO method agrees with the actual physical goods flow in most businesses.
A)True
B)False
Q6) Why is the LIFO cost flow assumption an acceptable valuation method for merchandise inventory when it rarely matches the physical movement of the product?
Page 9
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Chapter 7: Cash and Receivables
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Sample Questions
Q1) Which of the following would be deducted from the balance per bank?
A) An issued check that the company forgot to record on its books
B) Bank service charge
C) Outstanding checks
D) NSF check
Q2) A contingent liability is generally disclosed in the notes to the financial statements.
A)True
B)False
Q3) Installment accounts receivable covering periods longer than twelve months are classified as long-term assets.
A)True
B)False
Q4) In a petty cash fund,the current cash amount minus the receipts submitted should equal the original fixed amount.
A)True
B)False
Q5) Bad debts are considered as an expense of selling on credit.
A)True
B)False
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Chapter 8: Current Liabilities and Fair Value Accounting
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Sample Questions
Q1) Use this information to answer the following question. The following totals for the month of November were taken from the payroll register of Levine Company: \(\begin{array}{llr}
\text { Salaries expense } &\$12,000\\
\text { Social security and Medicare taxes withheld } &550\\
\text { Income taxes withheld } &2,500\\
\text { Medical insurance deductions } &250\\
\text { Life insurance deductions } &200\\
\text { Salaries subiect to federal and state unemployment taxes of 6.2 percent} &4,000\\ \end{array}\)
The entry to record the accrual of federal unemployment tax (assume FUTA tax of .8 percent)would include a
A) credit to Federal Unemployment Tax Payable for $32.
B) debit to Federal Unemployment Tax Payable for $32.
C) debit to FUTA Tax Expense for $32.
D) credit to Payroll Taxes and Benefits Expense for $32.
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11
Chapter 9: Long Term Assets
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Sample Questions
Q1) Extraordinary repairs usually are recorded by making a debit to A) a capital account.
B) Repair Expense.
C) a contra-asset account.
D) an asset account.
Q2) All of the following are possible reasons for using accelerated depreciation except A) greater efficiency of assets when new.
B) increasing repair costs in later years.
C) rapid changes in technology.
D) increasing use of an asset over the years.
Q3) A truck is purchased for $35,000.It has a five-year life and a $5,000 residual value.Under the double-declining-balance method,what is the accumulated depreciation after two years?
A) $19,200
B) $21,200
C) $22,400
D) $25,600
Q4) Under what circumstances will a loss be recorded on the sale of equipment,and what effect will the loss have on stockholders' equity?
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Chapter 10: Long-Term Liabilities
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Sample Questions
Q1) Under an operating lease,the lessee records both an asset and a liability.
A)True
B)False
Q2) When interest payments on an investment exceed the earnings from the investment,negative financial leverage has occurred.
A)True
B)False
Q3) The entry to record the issuance of bonds at a discount on an interest payment date should include a
A) debit to Cash for the face amount of the bonds.
B) debit to Cash for the face amount of the bonds plus the amount of discount.
C) debit to Cash for the face amount of the bonds minus the amount of discount.
D) credit to Cash for the face amount of the bonds.
Q4) Bonds that contain a provision that allows the issuing corporation to buy back the bonds prior to the maturity date are called
A) secured bonds.
B) callable bonds.
C) convertible bonds.
D) debenture bonds.
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Chapter 11: Contributed Capital
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Sample Questions
Q1) Use the following information to obtain the ratios requested below.Where necessary,carry answers to one decimal place.
Dividends per share: $.76
Market price per share: $40
Net income: $64,000
Stockholders' equity,beginning of year: $500,000
Stockholders' equity,end of year: $530,000
Earnings per share: $1.75
a. Dividends yield = _____________%
b. Return on equity = _____________%
c. Price/earnings (P/E) ratio = __________ times
Q2) Dividends on cumulative preferred stock do not become a liability of the corporation until they are declared by the board of directors.
A)True
B)False
Q3) The number of authorized shares should always equal or exceed the number of outstanding shares.
A)True
B)False
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Page 14
Chapter 12: Investments
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Sample Questions
Q1) Most long-term bond investments are classified as held-to-maturity securities.
A)True
B)False
Q2) When the accounting period ends before U.S.Treasury bills are scheduled to mature,the investor's adjusting entry would include a
A) debit to Short-Term Investments.
B) debit to Cash.
C) debit to Interest Income.
D) credit to Interest Payable.
Q3) Highland Company buys 70 percent of the stock of Danner Company of $91,000.Danner Company has contributed capital of $70,000 and retained earnings of $60,000.The consolidated financial statements would contain A) goodwill but not minority interest.
B) neither minority interest nor goodwill.
C) minority interest and goodwill.
D) minority interest but not goodwill.
Q4) Discuss the financial statement presentation of the account Allowance to Adjust Short-Term Investments to Market,distinguishing between the effect of a debit balance and the effect of a credit balance in the account.
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Chapter 13: The Corporate Income Statement and the Statement of Stockholders Equity
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Sample Questions
Q1) What is the basis of the statement "Accounting income is a useless measurement because it is based on so many arbitrary decisions"? Is the statement true? Explain your answer.
Q2) On a corporate income statement,income from continuing operations
A) will exceed net income.
B) will equal net income.
C) will be less than net income.
D) can equal, exceed, or be less than net income.
Q3) Deferred Income Taxes is classified as an asset when it has a debit balance.
A)True
B)False
Q4) A company with a high quality of earnings is one that has earned a substantial profit for the period.
A)True B)False
Q5) The federal income tax is progressive in nature. A)True B)False
Q6) What are potentially dilutive securities,and how do they relate to earnings per share calculations? Page 16
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Page 17
Chapter 14: The Statement of Cash Flows
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Sample Questions
Q1) A cash flow yield of 2.5 times is considered better than one of 2.0 times.
A)True
B)False
Q2) For 20xx,SCJ Corporation had average total assets of $520,000,sales of $450,000,net income of $50,000,net cash flows from operating activities of $75,000,dividend payments of $25,000,purchases of plant assets of $60,000,and sales of plant assets of $55,000.Using this information,compute (a)cash flow yield,(b)cash flows to sales,(c)cash flows to assets,and (d)free cash flow.Round amounts to one decimal place.
Q3) Cash equivalents do not include
A) U.S. Treasury bills.
B) money market accounts.
C) marketable securities.
D) commercial paper.
Q4) The direct method of preparing a statement of cash flows
A) is the overwhelming choice of most companies.
B) begins with net income in the operating activities section.
C) is more difficult to understand than the indirect method for the average reader.
D) will produce the same net figure as the indirect method.
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Page 18
Chapter 15: The Changing Business Environment - a Managers Perspective
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Sample Questions
Q1) The fathers of the balanced scorecard,Drs.Kaplan & Norton,introduced four generic perspectives from which to view a business.Consider the following four questions and briefly describe the generic perspective that relates to the question and why.
1.How should we present ourselves to our investors and owners to be considered by them as a financial success and an attractive investment?
2.What do we have to offer our customers related to our product,customer intimacy,and operational excellence?
3.In what activities must we excel to be able to accomplish our financial and customer-oriented objectives?
4.What do we need to change in our infrastructure to achieve number 3?
Q2) Activity-based costing traces costs to a company's activities related to A) purchasing and setup. B) production and nonproduction.
C) production only.
D) nonproduction only.
Q3) Give two examples of each stage in the management process.
Q4) Give two examples of nonfinancial performance measures.
Q5) What steps would a company using TQM take to improve product or service quality?
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Chapter 16: Cost Concepts and Cost Allocation
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Sample Questions
Q1) The amount of underapplied or overapplied overhead is the difference between applied overhead and estimated overhead.
A)True
B)False
Q2) Both product costs and period costs could appear on the income statement.
A)True
B)False
Q3) Which of the following would not be included in the cost of a manufactured product?
A) Cost to ship products to a customer
B) Cost of factory machinery used in production
C) Cost to design the product
D) Plant supervisor's salary
Q4) Materials costs flow from the Materials Inventory to the Work in Process Inventory to the Cost of Goods Sold account.
A)True
B)False
Q5) Period cost and product cost are synonymous terms.
A)True
B)False
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Chapter 17: Costing Systems- Job Order Costing
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Sample Questions
Q1) If applied overhead exceeds actual overhead,cost of goods sold must be reduced by the amount of the overcharge in a job order costing system.
A)True
B)False
Q2) Bear Country produces hand-carved wooden bears and uses a job order costing system.The following are data on the three jobs worked on in the company's first month of operations:
\(\begin{array}{lrrr}
&\text { Smokey } & \text { Rocky } & \text { Curious }\\
\text { Number of bears } & 180 & 100 & 80 \\
\text { Direct labor hours worked } & 400 & 200 & 140 \\
\text { Direct materials cost } & \$ 4,500 & \$ 2,700 & \$ 2,000 \\
\text { Direct labor cost } & \$ 6,000 & \$ 3,000 & \$ 2,100
\end{array}\) Overhead cost is applied to job orders on the basis of direct labor hours at a predetermined rate of $10 per hour.The Smokey and Rocky bears were completed during the month,and the Curious bears remained in work in process at the end of the month.
a. Compute the cost transferred to finished goods during the month.
b. Compute the unit cost for a Rocky bear.
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Chapter 18: Costing Systems- Process Costing
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Sample Questions
Q1) The equivalent units of production must be computed before the value of ending inventory can be determined in a process costing system.
A)True
B)False
Q2) When computing the cost per equivalent unit,the FIFO process costing method considers
A) current costs only.
B) current costs plus ending work in process inventory costs.
C) current costs less ending work in process inventory costs.
D) current costs plus beginning work in process inventory costs.
Q3) A measure of productive output of units for a period of time,expressed in terms of completed whole units,is the definition of
A) conversion costs.
B) ending work in process inventory.
C) equivalent units.
D) units started and completed.
Q4) In a process costing system,all production costs are assigned to departments.
A)True B)False
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Chapter 19: Value-Based Systems- Abm and Lean
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Sample Questions
Q1) Which of the following statements is true?
A) A company's value chain is not part of its supply chain.
B) A manufacturer's supply chain typically includes research and development and customer service.
C) A company's supply chain includes the value chains of its suppliers.
D) Your supplier's suppliers are part of your value chain.
Q2) Both activity-based management (ABM)and just-in-time (JIT)seek to eliminate or reduce nonvalue-adding activities and to improve the allocation of resources.
A)True
B)False
Q3) Unit level,batch level,and service level are examples of cost drivers.
A)True
B)False
Q4) The use of computer monitoring allows product costs to be traced directly to work cells.
A)True
B)False
Q5) When using a just-in-time system,what qualities should be used to evaluate a supplier?
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Chapter 20: Cost Behavior Analysis
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Sample Questions
Q1) Field Legal Services is trying to determine the variable and fixed elements of its service overhead.The following data have been collected from recent activity: \(\begin{array} { l r r } &\text { Total Service Overhead}&\text { Cases Worked }\\ \text { March } & 22,900 & 112 \\ \text { April } & 20,800 & 98 \\ \text { May } & 26,400 & 138 \end{array}\)
The formula for total service overhead costs is
A) $5,600 + $140 per case.
B) $5,600 + $40 per case.
C) $7,823 + $134.62 per case.
D) $7,080 + $140 per case.
Q2) All variable costs except manufacturing costs are subtracted from sales to determine the total contribution margin. A)True B)False
Q3) The contribution margin and the gross margin can be used interchangeably. A)True B)False
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Chapter 21: The Budgeting Process
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Sample Questions
Q1) Budgets facilitate congruence between organizational and personal goals.
A)True
B)False
Q2) Fantastic Futons manufactures futons.The estimated number of futon sales for the first three months of 2010 are as follows: \[\begin{array} { l l } \text { January } & 40,000 \\ \text { February } & 50,000 \\ \text { March } & 60,000 \end{array}\]
Finished goods inventory at the end of 2009 was 12,000 units.On average,25 percent of the futons are produced during the month before they are sold,which normally accounts for the ending balance in finished goods inventory.The planned selling price is $150 per unit.
How many futons are budgeted to be produced in February?
A) 37,500
B) 65,000
C) 52,500
D) 55,000
Q3) Describe three benefits budgeting provides to an organization's success.
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Page 25
Chapter 22: Performance Management and Evaluation
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Sample Questions
Q1) Variable costing is utilized to evaluate the performance of A) investment centers.
B) revenue centers.
C) discretionary cost centers.
D) profit centers.
Q2) What type of incentive compensation is utilized to motivate employees to achieve financial targets that increase the company's stock price?
A) Profit-sharing plans
B) Awards
C) Cash bonuses
D) Stock option programs
Q3) An evaluation of EVA will prove more meaningful if it is compared to A) target EVAs.
B) EVAs from other investment centers.
C) EVAs from previous periods.
D) all of these choices.
Q4) Economic value added is synonymous with shareholder wealth created by an investment center.
A)True
B)False
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Chapter 23: Standard Costing and Variance Analysis
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Sample Questions
Q1) Standard costs are useful for all but which of the following?
A) Determining actual costs
B) Preparing budgets and forecasts
C) Evaluating the performance of workers and management
D) Helping to develop appropriate selling prices
Q2) Service organizations use direct materials,direct labor,and overhead standard costs.
A)True
B)False
Q3) Performance reports normally include all of the following except
A) standard costs.
B) normal capacity.
C) total plantwide overhead costs.
D) budgeted costs.
Q4) Managers are constantly comparing the costs of what was expected to happen with the costs of what did happen.By examining the differences,or variances,managers can learn much valuable information.Identify and discuss the steps involved in variance analysis.
Q5) Discuss the keys to preparing a performance report based on standard costs and related variances.
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Chapter 24: Short Run Decision Analysis
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Sample Questions
Q1) In a proposal to increase the production of clock radios,the sales managers of Rinaldo Electronics reported the total additional cost required to meet the increased production level.The increase in total cost is known as the A) opportunity cost.
B) out-of-pocket cost.
C) controllable cost.
D) incremental cost.
Q2) Outsourcing is the use of suppliers outside the organization to perform services or produce goods that cannot be performed or produced internally.
A)True
B)False
Q3) In manufacturing companies,a common decision facing managers is whether to make or buy some or all of the parts used in product assembly.
A)True
B)False
Q4) Managers rely strictly on financial information when faced with decisions. A)True
B)False
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Chapter 25: Capital Investment Analysis
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Sample Questions
Q1) The future value of a cash flow is always larger than the present value of that cash flow.
A)True
B)False
Q2) Cost of capital information is not at all necessary to establish the minimum rate of return on investments.
A)True B)False
Q3) Qualitative factors that are considered by decision makers include all of the following except
A) impact on other company operations
B) revenue from fees
C) anticipated future technological improvements
D) competition.
Q4) The payback period method measures
A) the profitability of an investment.
B) the cash flows from an investment.
C) how quickly investment dollars may be recovered.
D) the economic life of an investment.
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Chapter 26: Pricing Decisions, incltarget Costing and Transfer Pricing
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Sample Questions
Q1) The markup percentage includes the gross margin in the computation of the selling price.
A)True
B)False
Q2) To stay in business,a company must have a selling price that is
A) acceptable to the customer.
B) able to recover the variable costs of production.
C) the highest in the marketplace.
D) equal to or lower than the company's costs per unit.
Q3) An internal issue to be considered when setting a price is
A) whether the process is labor-intensive or automated.
B) the customer's preferences for quality versus price.
C) current prices of competing products or services.
D) the life of the product or service.
Q4) Which of the following is not one of the three commonly used methods for determining transfer prices?
A) Dictated
B) Negotiated
C) Cost-plus
D) Market-based
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Chapter 27: Quality Management and Measurement
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Sample Questions
Q1) Though focus on quality is considered a modern management issue,the Deming Application Prize actually originated in 1951.
A)True
B)False
Q2) United Insurance Agency incurred the following activity costs related to service quality. \(\begin{array}{ll}
\text {Total sales}& \$ 1,000,000 \\
\text {Costs of quality:}\\
\text { Prevention } & 50,000 \\
\text { Appraisal } & 47,000 \\
\text { Internal failure } & 36,000 \\
\text { External failure } & 64,000
\end{array}\)
Costs of conformance total
A) $15,500.
B) $55,000.
C) $120,000.
D) $131,400.
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Chapter 28: Financial Analysis of Performance
Available Study Resources on Quizplus for this Chatper
164 Verified Questions
164 Flashcards
Source URL: https://quizplus.com/quiz/71983
Sample Questions
Q1) Dividends yield is a market strength ratio.
A)True
B)False
Q2) The index number used in trend analysis is computed by dividing the base year amount by the index year amount,and multiplying that result by 100.
A)True
B)False
Q3) What is the effect of the payment of an account payable on the current ratio and the quick ratio,respectively? (Assume the current ratio was 2.3 times and the quick ratio was 2.1 times before this transaction.)
A) Decrease in current ratio; no effect on quick ratio
B) Increase in current ratio; increase in quick ratio
C) No effect on current ratio; no effect on quick ratio
D) Decrease in current ratio; decrease in quick ratio
Q4) Rule-of-thumb measures are the best standards of comparison in financial performance evaluation.
A)True
B)False
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