Introduction to Accounting Test Bank
Course Introduction
Introduction to Accounting offers a foundational overview of the principles and practices of accounting, focusing on the systematic recording, reporting, and analysis of financial transactions. Students will learn about key concepts such as the accounting equation, double-entry bookkeeping, financial statement preparation, and the role of accounting in decision-making processes. Through practical examples and case studies, the course aims to develop an understanding of essential financial documents, such as balance sheets and income statements, and the importance of ethics in accounting. This course is suitable for students aiming to grasp the basics of accounting, whether for personal, professional, or further academic pursuits.
Recommended Textbook
Horngren's Accounting 11th Edition by Tracie L. Miller Nobles
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Chapter 1: Accounting and the Business Environment
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Sample Questions
Q1) The Financial Accounting Standards Board is a U.S.governmental agency that oversees the creation and governance of accounting standards.
A)True
B)False
Answer: False
Q2) By looking at a statement of owner's equity,the effect of owner's withdrawals on the ending balance of the capital account can be determined.
A)True
B)False
Answer: True
Q3) The Public Company Accounting Oversight Board (PCAOB)was created ________.
A)by the Sarbanes-Oxley Act (SOX)
B)to perform audits of public companies
C)to make restitution to investors who were defrauded by the issuance of fraudulent financial reports
D)to require auditors to take responsibility for the accuracy and completeness of financial reports
Answer: A
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Chapter 2: Recording Business Transactions
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Sample Questions
Q1) A business repays the amount borrowed on a note with cash.Which of the following accounts is debited?
A)Cash
B)Accounts Payable
C)Notes Payable
D)Notes Receivable
Answer: C
Q2) Balancing errors can be detected by computing the difference between total debits and total credits on the trial balance.
A)True
B)False Answer: True
Q3) The system of accounting in which every transaction affects at least two accounts is called the double-entry system.
A)True
B)False Answer: True
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Chapter 3: The Adjusting Process
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Q1) Techno Technical Services is working on a six-month job for a client,starting on February 1.It will collect $30,000 from its customer when the job is finished but the revenue is earned evenly over the six months.On March 31,before adjusting entries are made,Techno's Accounts Receivable account had a debit balance of $6,000.After the March 31 monthly adjusting entry has been made,what will be the balance in Accounts Receivable?
A)Debit balance of $5,000
B)Credit balance of $25,000
C)Debit balance of $11,000
D)Debit balance of $30,000
Answer: C
Q2) All of the accounts and the account balances of a company appear on the
A)statement of retained earnings
B)balance sheet
C)adjusted trial balance
D)income statement
Answer: C
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Chapter 4: Completing the Accounting Cycle
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Q1) In which of the columns of a worksheet would a net loss be found?
A)in the balance sheet credit column and the income statement debit column
B)in the balance sheet debit column and the income statement credit column
C)in the unadjusted trial balance credit column,the adjusted trial balance credit column,and the balance sheet credit column
D)in the unadjusted trial balance debit column,the adjusted trial balance debit column,and the balance sheet debit column
Q2) The last two columns generally found on the right side of the worksheet are the income statement columns.
A)True B)False
Q3) Net income (loss)is the difference between the total debits and the total credits in the income statement columns of the worksheet. A)True B)False
Q4) The adjusting process zeroes out all revenue accounts and all expense accounts. A)True B)False
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Chapter 5: Merchandising Operations
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Sample Questions
Q1) When a customer returns goods to the seller,the seller debits the Purchase Returns account.
A)True
B)False
Q2) FOB destination refers to a situation where title to goods while in transit belongs to the ________.
A)buyer
B)seller
C)transport agency
D)insurance agency
Q3) Oscar Packers received an allowance from the vendor for an amount of $400.Give the journal entry for this transaction.The company uses a perpetual inventory system.
Q4) A company using the perpetual inventory system purchased merchandise on account for $5,000.Give the journal entry to record this transaction.
Q5) The gross profit percentage measures the profitability of each sales dollar above the cost of goods sold.
A)True B)False
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Chapter 6: Merchandise Inventory
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Sample Questions
Q1) Which of the following principles states that a business should not report anticipated gains?
A)conservatism
B)materiality concept
C)disclosure
D)consistency
Q2) Which of the following values is considered the market value when valuing inventory at lower-of-cost-or-market?
A)sales price less the company's normal mark-up percentage
B)current replacement cost
C)cost plus the company's normal mark-up percentage
D)historic cost
Q3) In the weighted-average inventory costing method,when using the periodic inventory system,a single weighted average cost per using is computed for the entire period.
A)True
B)False
Q4) Universal,Inc.purchased 500 units of inventory at $25 per unit by payment of cash.Provide the journal entry to record the purchase of inventory.(Assume a perpetual inventory system. )
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Chapter 7: Accounting Information Systems
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Sample Questions
Q1) Companies are now spending less amounts of cash to ensure that their data and information are secure.
A)True
B)False
Q2) St.Petersburg Corporation makes a $1,200 purchase of merchandise inventory for cash.This transaction will be recorded in the ________.
A)cash payments journal
B)general journal
C)cash receipts journal
D)purchase journal
Q3) Prenumbered source documents provide necessary control in a system by automatically assigning a sequential number to each new transaction.
A)True
B)False
Q4) List and briefly discuss the three basic components of an accounting information system.
Q5) In a networked system,the server stores the program and the data.
A)True
B)False
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Chapter 8: Internal Control and Cash
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Sample Questions
Q1) Before any internal control procedure is initiated,which of the following questions must be primarily addressed by a company?
A)Will this put an end to theft?
B)Is this the best security money can buy?
C)How much benefit will be derived from the cost of the procedure?
D)Will this prevent accounting errors?
Q2) In a large company,the person who is responsible for comparing cash and the bank balance is the ________.
A)CEO
B)CFO
C)controller
D)treasurer
Q3) Cash and cash equivalents are divided by ________ to determine the cash ratio.
A)total current liabilities
B)fixed assets
C)equity
D)total long-term liabilities
Q4) There are three parties to a check: the depositor,the maker,and the bank.
A)True
B)False
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Chapter 9: Receivables
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Sample Questions
Q1) The Allowance for Bad Debts account has a debit balance of $9,000 before the adjusting entry for bad debts expense.After analyzing the accounts in the accounts receivable subsidiary ledger using the aging-of-receivables method,the company's management estimates that uncollectible accounts will be $13,000.What amount of bad debts expense will be reported on the income statement?
A)$5,000
B)$22,000
C)$4,000
D)$13,000
Q2) The collection period of accounts receivable is usually long: therefore,it is classified as a long-term asset on the balance sheet.
A)True
B)False
Q3) On October 1,2016,Lee's Electronic sold merchandise in exchange for a 4 month,$20,000 note receivable,with 6% interest.Interest revenue of $400 is earned in 2017.
A)True
B)False
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Chapter 10: Plant Assets, natural Resources, and Intangibles
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Q1) On January 1,2016,Martini,Inc.acquired a machine for $1,030,000.The estimated useful life of the asset is five years.Residual value at the end of five years is estimated to be $87,000.What is the book value of the machine at the end of 2017 if the company uses the straight-line method of depreciation?
A)$618,000
B)$652,800
C)$565,800
D)$617,996
Q2) Companies are required to report plant assets as a single amount,with a note to the financial statements that provides detailed information.
A)True
B)False
Q3) Businesses are required to use Modified Accelerated Cost Recovery System (MACRS)for tax purposes.
A)True
B)False
Q4) Coney Island Corp.discards a truck that was originally purchased for $50,000 and had accumulated depreciation of $30,000.Prepare the journal entry for the disposal.
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Chapter 11: Current Liabilities and Payroll
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Q1) A payroll register is a schedule that summarizes the earnings,withholdings,and net pay for each employee.
A)True
B)False
Q2) On December 31,2016,Circle,Inc.borrowed $500,000 by signing a five-year,8% note payable.The note is payable in five yearly installments of $100,000 plus interest,due at the end of every year beginning on December 31,2017.Which portion is classified as the long-term portion of Notes Payable at December 31,2016?
Q3) NewAge,Inc.made total cash sales in February of $666,000,which are subject to 7.5% sales tax.Prepare the summary entry to record the transaction.
Q4) Which of the following taxes has a ceiling on the amount of annual earnings subject to tax?
A)FICA-OASDI taxes
B)sales tax
C)federal income tax
D)FICA-Medicare taxes
Q5) If the likelihood of a future event is reasonably possible,how should the company report the contingency?
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Chapter 12: Partnerships
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Sample Questions
Q1) Which of the following is true of a partnership?
A)All partnership firms are public firms.
B)Partnership firms have a limited life.
C)The owners of the partnership have limited liabilities for the partnership's debts.
D)The maximum loss an owner of a partnership can incur is the invested amount.
Q2) Which of the following will result in the dissolution of a partnership?
A)admission of a new partner
B)purchase of plant assets for the business
C)contribution of an asset by an existing partner
D)a partner's withdrawal of cash from the partnership
Q3) New partners will always be admitted to a partnership at a contribution equal to or greater than the book value of their interest.
A)True
B)False
Q4) When a new partner is admitted at a higher-than-book-value contribution,the existing partners will receive a bonus amount.
A)True
B)False
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Chapter 13: Corporations
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Q1) The statement of stockholders' equity does not show the changes to the Retained Earnings account because that information is provided in the statement of retained earnings.
A)True
B)False
Q2) Preferred stockholders ________.
A)are guaranteed that they will not have a loss on their investment
B)are guaranteed to receive an annual dividend payment
C)receive a set percentage of corporation net income
D)receive a dividend preference over common stockholders
Q3) When a corporation issues no-par stock,it debits the asset received and credits the stock account.
A)True B)False
Q4) Both common and preferred stock carry the same degree of investment risk for the stockholder.
A)True
B)False
Q5) List the four basic rights of stockholders.
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Chapter 14: Long-Term Liabilities
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Q1) Blandings Glassware Company issues $1,171,000 of 12%,10-year bonds at 95 on February 28,2017.The bonds pay interest on February 28 and August 31.The journal entry to record the issuance includes a ________.
A)debit to Cash for $1,171,000
B)credit to Bonds Payable for $1,112,450
C)credit to Discount on Bonds Payable for $58,550
D)debit to Cash for $1,112,450
Q2) Which of the following statements is true of a bond that is issued at a premium?
A)The bond will be issued at an amount above face value.
B)The stated interest rate is lower than the prevailing market interest rate.
C)At maturity,the bond will repay an amount that is greater than the face value.
D)The bond will be issued at par.
Q3) A stream of equal cash payments made at equal time intervals is called a(n)________.
A)present value
B)annuity
C)compound interest
D)future value
Q4) When computing the present value of a bond,which interest rate is used? Why?
Q5) When computing a bond's cash flow for interest,which interest rate is used? Why?
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Chapter 15: Investments
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Sample Questions
Q1) Under the equity method,dividend revenue is treated as ________.
A)a debit to revenue from investments
B)dividend revenue
C)a return of capital
D)a credit to current assets
Q2) Anthem Corporation has excess cash to invest and pays $200,000 to buy 7%,five-year bonds of Richmond Corporation,at face value,on June 30,2016.The bonds pay interest on June 30 and December 31.At the date of purchase,Anthem intended to hold the bonds to maturity.The bonds are disposed of,at face value,on June 30,2021. Prepare the journal entry for (omit the explanation)June 30,2021 (assume that the last interest payment has already been recorded).
Q3) The unrealized holding gains and losses on available-for-sale investments are reported on the income statement.
A)True
B)False
Q4) List and briefly describe the method used to account for investments in equity securities with 50% or more ownership.
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Chapter 16: The Statement of Cash Flows
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Q1) The only part that differs in a statement of cash flows prepared by the direct method from one prepared by the indirect method is the ________.
A)financing activities section
B)investing activities section
C)operating activities section
D)non-cash investing and financing activities section
Q2) Shield Company needs to purchase a property to build their headquarters.An investor is willing to exchange land worth $700,000 for shares of common stock.On the statement of cash flows,this transaction would be shown as ________.
A)investing activities
B)non-cash investing and financing activities
C)operating activities
D)financing activities
Q3) The statement of cash flows helps users ________.
A)predict future net income
B)evaluate management decisions
C)evaluate the company's earnings per share
D)predict the growth of a company's assets
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Chapter 17: Financial Statement Analysis
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Q1) To accurately determine the financial performance of a company,it is necessary to compare performance ________.
A)with a competing company
B)to the budget
C)with companies in different industries
D)only with profitable companies
Q2) A high current ratio indicates that current liabilities are greater than current assets.
A)True
B)False
Q3) Common-size statements ________.
A)allow the users to compare numbers in relative terms rather than absolute amounts
B)report dollar amounts and percentages
C)create a dollar value bias
D)show the same percentages that appear in a horizontal analysis
Q4) The audit report in the annual report attests to the fairness of the presentation of the financial statements.
A)True
B)False
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Chapter 18: Introduction to Managerial Accounting
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Q1) Which of the following correctly describes the accounting for administrative expenses of a manufacturing company?
A)Administrative expenses are product costs and are expensed as incurred.
B)Administrative expenses are period costs and are expensed as incurred.
C)Administrative expenses are product costs and are expensed when the manufactured product is sold.
D)Administrative expenses are period costs and are expensed when the manufactured product is sold.
Q2) Service companies sell their time,skills,and knowledge.
A)True
B)False
Q3) The IMA standards of ethical practice require managerial accountants to maintain their professional competence.
A)True
B)False
Q4) Repair and maintenance costs of vehicles used to deliver products to customers are product costs.
A)True
B)False
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Chapter 19: Job Order Costing
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Q1) At the end of the year,Metro,Inc.has an unadjusted credit balance in the Manufacturing Overhead account of $750.Which of the following is the year-end adjusting entry needed to adjust the account?
A)A debit to Cost of Goods Sold of $750 and a credit to Finished Goods Inventory of $750
B)A debit to Manufacturing Overhead of $750 and a credit to Finished Goods Inventory of $750
C)A debit to Manufacturing Overhead of $750 and a credit to Cost of Goods Sold of $750
D)A debit to Cost of Goods Sold of $750 and a credit to Manufacturing Overhead of $750
Q2) Why would the manager of a service company need to use job order costing?
Q3) Ivade,Inc.uses a predetermined overhead allocation rate of $75 per direct labor hour.In January,Ivade completed Job B23,which utilized 20 direct labor hours.Provide the journal entry to allocate overhead to the job.
Q4) What causes manufacturing overhead to be underallocated? When manufacturing overhead is underallocated,will the Manufacturing Overhead account have a debit or a credit balance?
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Chapter 20: Process Costing
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Q1) The production cost report for Department 1 shows that $160,000 was assigned to the 31,000 units transferred to Department 2.This transfer cost assigned to units transferred to Department 2 is recorded with a debit to Work-in-Process-Department 2.
A)True
B)False
Q2) The direct labor costs and manufacturing overhead costs required to produce finished goods from raw materials are called ________.
A)transferred in costs
B)cost of sales
C)finished goods costs
D)conversion costs
Q3) In a process costing system,costs can be controlled with the aid of a production cost report.
A)True
B)False
Q4) List five ways in which managers use a production cost report to make decisions for their companies.
Q5) Provide the formula for (1)To account for and (2)Accounted for.
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Chapter 21: Cost-Volume-Profit Analysis
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Q1) Bertrand Enterprises sells computer disks for $1.70 per disk.Unit variable expenses total $0.80.The breakeven point in units is 4,000 and expected sales in units are 4,500.What is the margin of safety in dollars?
A)$6,800
B)$850
C)$3,600
D)$7,650
Q2) Fontana Pizza Company sells pizzas in two different sizes-medium and large.The number of medium pizzas sold is twice the number of large pizzas sold.The contribution margin of a medium pizza is $12 and the contribution margin of a large pizza is $18.The weighted average contribution margin is $15.
A)True
B)False
Q3) When the total fixed costs increases,the contribution margin per unit ________.
A)increases
B)decreases
C)increases proportionately
D)remains the same
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Chapter 22: Master Budgets
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Q1) List the budgets that are affected by the budgeted number of units to be produced.
Q2) McLeod Fries,Inc.has budgeted sales for June and July at $670,000 and $770,000,respectively.Sales are 85% credit,of which 60% is collected in the month of sale and 40% is collected in the following month.What is the budgeted Accounts Receivable balance on July 31?
A)$308,000
B)$261,800
C)$227,800
D)$654,500
Q3) Purchases of direct material for May were $114,000,while expected purchases for June and July are $121,000 and $140,000,respectively.All purchases are paid 75% in the month of purchase and 25% the following month.Calculate the budgeted payments for the month of June.
A)$119,250
B)$115,750
C)$121,000
D)$30,250
Q4) What is the formula used to determine the amount of merchandise inventory to be purchased?
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Chapter 23: Flexible Budgets and Standard Cost Systems
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Q1) The static budget,at the beginning of the month,for Keats Company follows:
Static budget:
Sales volume: 2,000 units;Sales price: $51.00 per unit
Variable costs: $12.50 per unit;Fixed costs: $26,500 per month
Operating income: $50,500
Actual results,at the end of the month,follows:
Actual results:
Sales volume: 1,950 units;Sales price: $60.00 per unit
Variable costs: $16.00 per unit;Fixed cost: $38,000 per month
Operating income: $47,800
Calculate the sales volume variance for operating income.
A)$775 U
B)$50 F
C)$1,925 U
D)$1,925 F
Q2) When a manufacturing company uses a standard cost system,Work-in-Process
Inventory is debited at standard input quantities and standard costs.
A)True
B)False
Q3) What does the variable overhead efficiency variance measure?
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Chapter 24: Cost Allocation and Responsibility Accounting
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Q1) Which would be an appropriate cost driver for the warranty services activity?
A)direct labor hours
B)number of service calls
C)number of purchase orders
D)number of batches
Q2) Madsen,Inc.intends to increase its profits by 50% in the next fiscal year.Which of the following is most likely to be a lead indicator in Madsen's performance report?
A)return on investment
B)number of repeat customers
C)net profit margin
D)sales revenue growth
Q3) An investment center manager is responsible for generating profits and managing invested capital.
A)True
B)False
Q4) In general,calculating ROI based on the gross book value of assets gives managers an incentive to continue using old,outdated equipment.
A)True
B)False
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Chapter 25: Short-Term Business Decisions
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Q1) Which of the following is irrelevant when deciding to upgrade a company's heating and air conditioning system?
A)the energy efficiency of the old equipment versus the energy efficiency of the new equipment
B)the safety of the new equipment compared to the old equipment
C)the purchase price of the old equipment compared to the purchase price of the new equipment
D)the productivity of the old equipment compared to that of the new equipment
Q2) Carlos Naturals manufactures bulk quantities of cleaning fluids.The company currently sells 900 containers a month at a sales price of $26 per unit.The addition of a new disinfectant will result in a sales price of $28 per unit for the improved product.It would cost a total of $4,200 per month to make the alteration.Operating income would
A)decline by $23,400
B)increase by $4,200
C)increase by $2,400
D)decline by $2,400
Q3) Explain the difference between price-takers and price-setters.
Q4) Define the terms Relevant Cost and Sunk Cost.
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Chapter 26: Capital Investment Decisions
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Q1) A major criticism of the payback method is that it focuses only on the time to recover the investment and ignores profitability.
A)True
B)False
Q2) The discounted cash flow methods of evaluating capital investments are superior because they consider both the time value of money and the profitability of the investment.
A)True
B)False
Q3) Which of the following best describes the term capital rationing?
A)a method of determining the period within which the cash invested is recouped
B)a process of ranking and choosing among alternative capital investments based on the availability of funds
C)a method which shows the effect of an investment on a company's accrual-based income
D)a process of controlling operating costs when adequate funds are not available
Q4) An annuity is a stream of equal cash payments made at equal time intervals.
A)True
B)False
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