Introduction to Accounting Pre-Test
Questions
Course Introduction
Introduction to Accounting provides students with a comprehensive overview of foundational accounting principles, practices, and processes essential for business decision-making. The course covers key topics such as the accounting cycle, preparation and interpretation of financial statements, recording of transactions, and concepts related to assets, liabilities, and equity. Through real-world examples and practical exercises, students will develop the analytical skills needed to understand financial information and apply accounting techniques in various organizational contexts. This course serves as a stepping stone for further study in accounting and finance, equipping learners with the basic knowledge required for effective financial management.
Recommended Textbook
Introduction to Management Accounting 16th Edition by Charles T. Horngren
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Page 2
Chapter 1: Managerial Accounting,the Business
Organization,and Professional Ethics
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Sample Questions
Q1) According to the Financial Executives Institute,a function of the treasurer is
A) reporting and interpreting
B) short-term financing
C) protection of assets
D) government reporting
Answer: B
Q2) When designing an accounting information system for management,which governmental regulations are NOT important?
A) Sarbanes-Oxley Act
B) Foreign Corrupt Practices Act
C) Tax rules promulgated by Internal Revenue Service
D) Six Sigma Act
Answer: D
Q3) Generally Accepted Accounting Principles are most closely connected to ________.
A) management accounting
B) financial accounting
C) internal auditing
D) management auditing
Answer: B
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Chapter 2: Introduction to Cost Behavior and Cost Volume
Profit Relationships
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Q1) Worbel Company has variable costs of $5 per unit and a selling price of $10 per unit.Fixed costs are $100,000.Planned unit sales for 2015 are 25,000 units.Actual unit sales for 2014 were 22,000.What is the margin of safety in dollars for 2015?
A) $5,000
B) $20,000
C) $30,000
D) $50,000
Answer: D
Q2) Gokey Company has a contribution-margin ratio of 0.30.Targeted net income is $76,800 and targeted sales volume in dollars is $480,000.What are total fixed costs?
A) $23,000
B) $44,160
C) $67,200
D) $144,000
Answer: C
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Chapter 3: Measurement of Cost Behavior
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Sample Questions
Q1) When managers graph a linear cost function with one cost driver,the intercept represents the ________ cost and the slope represents the ________ cost.
A) variable; fixed
B) fixed; variable
C) fixed; mixed
D) variable; mixed
Answer: B
Q2) In relation to a cost function,the term reliability means ________.
A) whether the costs and activities can be easily observed
B) whether the cost function conforms to a given mathematical model
C) how well the cost function predicts future costs
D) how well the cost function explains past cost behavior
Answer: D
Q3) In an economic downturn,a company could temporarily reduce or eliminate a(n)________.
A) lease payment
B) salaries of key personnel
C) employee training program
D) insurance on corporate offices
Answer: C
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Chapter 4: Cost Management Systems and Activity-Based
Costing
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Sample Questions
Q1) Which of the following purposes of cost allocation provides information for operational control in an organization?
A) to compute income and asset valuations for financial reports
B) to compute Cost of Goods Sold for financial reports
C) to determine the number of cost drivers for a product
D) to provide the desired motivation and to give feedback for performance evaluation
Q2) A merchandising firm has ________ inventory account(s).A manufacturing firm has ________ inventory account(s).
A) one; three
B) three; one
C) two; three
D) three; three
Q3) Costs that can be allocated to a cost object are called direct costs.
A)True
B)False
Q4) Indirect manufacturing costs are the same as manufacturing overhead costs.
A)True
B)False
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Chapter 5: Relevant Information for Decision Making With a
Focus on Pricing Decisions
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Q1) Relevant information is the historical costs and revenues that differ due to alternative courses of action.
A)True
B)False
Q2) In perfect competition,the profit-maximizing volume is the quantity at which the difference between the sales price and marginal cost is at its greatest.
A)True
B)False
Q3) Pricing is not discriminatory if it reflects a cost differential incurred in providing the good or service.
A)True
B)False
Q4) In imperfect competition,firms should produce and sell units until the ________ equals the ________.
A) average revenue; marginal cost
B) marginal revenue; average revenue
C) average revenue; average cost
D) marginal revenue; marginal cost
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Chapter 6: Relevant Information for Decision Making With a
Focus on Operational Decisions
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Q1) A widespread problem in practice is that the decision model used by managers for ________ and the model used by their superiors in ________ are different.
A) outsourcing; incremental analysis
B) outsourcing; differential analysis
C) decision making; performance evaluation
D) operational decisions; joint costing
Q2) In make-or-buy decisions for a part for a product,relevant costs include ________.
A) some variable costs of making the part
B) all variable costs of making the part
C) fixed costs that can be avoided in the future if the part is purchased
D) B and C
Q3) Qualitative factors do not affect a make-or-buy decision.
A)True
B)False
Q4) An equipment's book value is the original cost plus accumulated depreciation.
A)True
B)False
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Chapter 7: Introduction to Budgets and Preparing the Master Budget
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Sample Questions
Q1) Marjorie Company has the following information: \(\begin{array}{ll}\text { Month }&\text { Budgeted Purchases }\\
\text { January } & \$ 25,000 \\
\text { February } & 19,000 \\
\text { March } & 33,000 \\
\text { April } & 27,000 \\
\text { May } & 27,680 \end{array}\)
Purchases are paid as follows:
75% in the month of purchase
25% one month after purchase
What are the estimated cash disbursements in March?
A) $22,500
B) $24,750
C) $29,500
D) $39,000
Q2) Depreciation expense is usually a disbursement listed on the cash budget. A)True
B)False
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Chapter 8: Flexible Budgets and Variance Analysis
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Sample Questions
Q1) Ideal standards have an adverse effect on employee motivation.
A)True
B)False
Q2) In most companies,variances are investigated only if they exceed a minimum dollar amount or percentage deviation from budgeted amounts.
A)True
B)False
Q3) Christian Company reported a flexible budget variance for direct materials costs of $10,000 Favorable for the current year.If the direct materials price variance was $2,000 Favorable,what was the direct materials quantity variance?
A) $8,000 Unfavorable
B) $8,000 Favorable
C) $12,000 Favorable
D) $12,000 Unfavorable
Q4) The flexible budget variance for direct labor can be broken down into a price variance and an effectiveness variance.
A)True
B)False
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Chapter 9: Management Control Systems and Responsibility Accounting
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Sample Questions
Q1) ________ performance measures are often ________ indicators that arrive too late to prevent problems in organizations.
A) Nonfinancial; leading
B) Nonfinancial; lagging
C) Financial; leading
D) Financial; lagging
Q2) External failure costs associated with quality control do NOT include ________.
A) field repairs
B) rework
C) customer returns of goods
D) warranty expense
Q3) The term "cost center" may be used to describe responsibility centers that are assigned responsibility for capital investment.
A)True
B)False
Q4) Why will management control systems in nonprofit organizations probably never be as highly developed as those in profit-seeking firms?
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Chapter 10: Management Control in Decentralized Organizations
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Sample Questions
Q1) The variable cost of Part X is $50 per unit and the full cost of the part is $80 per unit.The part is produced in Country Z and transferred to a plant in Country B.Country Z has a 10% income tax rate.Country B has a 50% income tax rate and an import duty equal to 10% of the price of the item.Part X can be transferred at full cost or variable cost.Assume Part X is transferred at full cost.By using full cost instead of variable cost for the transfer price,the net savings is ________.
A) $3 per unit
B) $6 per unit
C) $9 per unit
D) $15 per unit
Q2) Decentralization is more successful in organizations when ________.
A) multiple segments buy from the same outside suppliers
B) multiple segments sell to the same customers
C) there are frequent purchases and sales made between segments of the organization
D) an organization's segments are relatively independent of each other
Q3) Capital turnover can be increased by decreasing investment.
A)True
B)False
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Chapter 11: Capital Budgeting
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Sample Questions
Q1) The higher the risk of an investment project,the ________ for the project.
A) lower the minimum desired rate of return
B) higher the minimum desired rate of return
C) lower the expected rate of return
D) higher the expected rate of return
Q2) The marginal income tax rate is the tax rate paid on additional amounts of pretax income.
A)True
B)False
Q3) Using the net present value method,managers sum the present values of all expected future cash flows from the project and ________.
A) add the initial investment
B) subtract the initial investment
C) ignore the initial investment
D) add the depreciation expense
Q4) A disadvantage of the accounting rate of return model is ________.
A) it focuses on cash flows
B) it is inconsistent with accrual accounting
C) it is not based on the familiar financial statements
D) it ignores the time value of money
13
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Chapter 12: Cost Allocation
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Sample Questions
Q1) Under the traditional approach to cost allocation,the costs in each cost pool are allocated to a product in proportion to the product's usage of the ________.
A) available capacity
B) budgeted capacity
C) cost-allocation base
D) cost pool
Q2) Which of the following formulas should be used to allocate variable costs from service departments to user departments?
A) budgeted unit rate × total budgeted units planned to be used
B) actual unit rate × total budgeted units planned to be used
C) budgeted unit rate × actual units used
D) actual unit rate × actual units used
Q3) The direct method of cost allocation is generally preferred because it recognizes the effect of support provided by service departments to other service departments.
A)True
B)False
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Chapter 13: Accounting for Overhead Costs
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Sample Questions
Q1) The following information was gathered for Edwards Company: \(\begin{array}{ll}
\text { Budgeted direct labor hours } & 75,000 \\
\text { Actual direct labor hours } & 77,500 \\
\text { Budgeted factory overhead costs } & \$ 562,500 \\
\text { Actual factory overhead costs } & \$ 540,000\\\text { Cost driver of overhead costs }&\text { Direct labor hours } \end{array}\)
Required:
A) Compute the budgeted factory overhead rate.
B) Compute the factory overhead applied.
C) Compute the amount of underapplied or overapplied factory overhead.
Q2) Under the immediate write-off method of disposing of underapplied or overapplied overhead costs,current net income is ________ by underapplied overhead costs and current net income is ________ by overapplied overhead costs.
A) increased, decreased
B) decreased, increased
C) not affected, not affected
D) none of the above
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Chapter 14: Job-Order Costing and Process-Costing Systems
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Q1) Conoco Company has an actual factory overhead cost of Depreciation Expense-Equipment of $5,000.Job-order costing is used.The journal entry to record this actual cost would include ________.
A) Debit to Factory Department Overhead Control $5,000 and Credit to Accumulated Depreciation-Equipment $5,000
B) Debit to Depreciation Expense-Equipment $5,000 and Credit to Accumulated Depreciation-Equipment $5,000
C) Debit Work-In-Process Inventory $5,000 and Credit to Factory Department Overhead Control $5,000
D) Debit to Work-In-Process Inventory $5,000 and Credit to Factory Department Overhead Applied $5,000
Q2) Regardless of the nature of a company's production system,there will always be resources that are shared among different products.
A)True B)False
Q3) Companies that use job-order costing normally have uniform production steps. A)True B)False
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Chapter 15: Basic Accounting: Concepts, techniques, and Conventions
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Sample Questions
Q1) An example of an implicit transaction is cash received on account.
A)True
B)False
Q2) On January 1,2014,Everest Company paid $4,000 for insurance that covers the period,February 1,2014 through January 31,2015.Which of the following journal entries is prepared on January 1,2014?
A) Debit Insurance Expense $4,000 and Credit Cash $4,000
B) Debit Prepaid Insurance $4,000 and Credit Cash $4,000
C) Debit Cash $4,000 and Credit Insurance Expense $4,000
D) Debit Cash $4,000 and Credit Insurance Revenue $4,000
Q3) Jackson Company collected $1,200 on account.Jackson will ________.
A) Debit Cash $1,200 and Credit Accounts Payable $1,200
B) Debit Accounts Receivable $1,200 and Credit Cash $1,200
C) Debit Accounts Payable $1,200 and Credit Cash $1,200
D) Debit Cash $1,200 and Credit Accounts Receivable $1,200
Q4) Increases in revenues will ________.Increases in expenses will ________ .
A) increase Retained Earnings; increase Retained Earnings
B) increase Retained Earnings; decrease Retained Earnings
C) decrease Paid in Capital; decrease Paid in Capital
D) increase assets; increase liabilities
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Chapter 16: Understanding Corporate Annual Reports: Basic Financial Statements
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Sample Questions
Q1) A unit of ending inventory has a cost of $100 per unit.The selling price per unit is $200.The replacement cost per unit is $90.What value is reported for this inventory on the balance sheet?
A) $90
B) $100
C) $110
D) $200
Q2) Cash receipts of interest income are reported in the ________ section of the statement of cash flows.The direct method is used.
A) operating activities
B) investing activities
C) financing activities
D) noncash investing and financing activities
Q3) A multiple step income statement has several measures of profit that do NOT include ________.
A) operating income
B) gross margin
C) income before taxes
D) cost of sales
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Chapter 17: Understanding and Analyzing Consolidated Financial Statements
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Q1) Accountants require investors without significant influence over the decisions of an investee firm to use the ________ method.
A) equity
B) cost
C) market value
D) lower of cost or market
Q2) The company that owns 100 percent of another company's stock is called the ________.The company that is controlled by another company is called the ________.
A) majority interest; minority interest
B) controlling interest; noncontrolling interest
C) parent; subsidiary
D) subsidiary; segment
Q3) The existence of a parent company and a subsidiary requires special accounting procedures.
A)True
B)False
Q4) The Investment in Subsidiary account appears on a consolidated balance sheet.
A)True
B)False
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