Introduction to Accounting Test Preparation
Course Introduction
Introduction to Accounting provides students with a comprehensive overview of fundamental accounting principles and practices. The course covers essential topics such as the accounting cycle, preparation and analysis of financial statements, double-entry bookkeeping, and the regulatory environment governing financial reporting. Students will learn how to record, classify, and summarize business transactions, enhancing their ability to interpret financial information crucial for decision-making. Emphasis is placed on the role of accounting in organizations and its importance in communicating financial performance to internal and external stakeholders.
Recommended Textbook
Financial Managerial Accounting 14th Edition by Carl Warren
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26 Chapters
4705 Verified Questions
4705 Flashcards
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Page 2
Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) The asset created by a business when it makes a sale on account is termed
A) accounts payable
B) prepaid expense
C) interest revenue
D) accounts receivable
Answer: D
Q2) Which of the following items relates to separating the reporting of business and personal economic transactions?
A) cost principle
B) monetary unit assumption
C) business entity assumption
D) measurement principle
Answer: C
Q3) The debt created by a business when it makes a purchase on account is referred to as an
A) account payable
B) account receivable
C) asset
D) expense payable
Answer: A
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Chapter 2: Analyzing Transactions
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Sample Questions
Q1) Accounts in the ledger are usually maintained in alphabetical order.
A)True
B)False
Answer: False
Q2) On August 30,JumpStart incurred the following expenses:
Payment to the landlord for August rent,$2,300
Payment to the Gas & Electric Company for August's bill,$525
Payment of employee wages for the last half of August,$1,750
Payment of shopping center's parking lot cleaning fee,$275
Journalize these payments as one journal entry.
Answer: 11ea8952_b5b5_690a_861b_e76b676f90ff_TB6238_00
Q3) Which of the following is true about T accounts?
A) The left side of a T account is called the debit side.
B) The left side of a T account is called the credit side.
C) The right side of a T account is called the debit side.
D) Transactions are first recorded in T accounts and then posted to the journal.
Answer: A
Q4) Prepare a trial balance,listing the accounts in their proper order.
Answer: 11ea8952_b5b6_efd3_861b_e994a5741833_TB6238_00
Page 4
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) Generally accepted accounting principles require accrual-basis accounting. A)True
B)False
Answer: True
Q2) An example of deferred revenue is Unearned Rent. A)True
B)False Answer: True
Q3) On January 1,Power House Co.prepaid the annual rent of $10,140.Prepare the journal entry to record this transaction.
Answer: 11ea8952_b5af_010a_861b_0b3297b44209_TB6238_00
Q4) If the adjustment for depreciation for the year is inadvertently omitted,the assets on the balance sheet at the end of the period will be understated. A)True
B)False Answer: False
Q5) For each of the following,journalize the necessary adjusting entry:
Answer: 11ea8952_b5ae_3da9_861b_210253fcc7e3_TB6238_00 11ea8952_b5ae_64ba_861b_895f609b4a0f_TB6238_00
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Stockholders' equity is
A) added to assets and the two are equal to liabilities
B) added to liabilities and the two are equal to assets
C) subtracted from liabilities and the net amount is equal to assets
D) equal to the total of assets and liabilities
Q2) Office Equipment is an example of a current asset account.
A)True
B)False
Q3) Notes receivable due in 390 days appear on the
A) balance sheet in the current assets section
B) balance sheet in the noncurrent assets section
C) balance sheet in the current liabilities section
D) income statement as an expense
Q4) The difference between the totals of the debit and credit columns of the Adjusted Trial Balance columns on the end-of-period spreadsheet
A) is the amount of net income or loss
B) indicates there is an error on the end-of-period spreadsheet
C) is the amount of retained earnings
D) is the difference between revenue and expenses
Q5) Describe a classified balance sheet.
Page 6
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Chapter 5: Accounting for Merchandising Businesses
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Sample Questions
Q1) Cost of goods sold is often the largest expense on a merchandising company income statement.
A)True
B)False
Q2) Inventory is classified on the balance sheet as a
A) current liability
B) current asset
C) long-term asset
D) long-term liability
Q3) When goods are shipped FOB destination and the seller pays the freight charges,the buyer
A) journalizes a reduction for the cost of the merchandise
B) journalizes a reimbursement to the seller
C) does not take a discount
D) makes no journal entry for the freight
Q4) If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment,the terms are stated as FOB destination.
A)True B)False
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Chapter 6: Inventories
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Sample Questions
Q1) The firm uses the periodic system,and there are 20 units of the commodity on hand at the end of the year.What is the amount of inventory at the end of the year according to the FIFO method?
A) $655
B) $620
C) $690
D) $659
Q2) During a period of falling prices,which of the following inventory methods generally results in the lowest balance sheet amount for inventory?
A) average cost method
B) LIFO method
C) FIFO method
D) cannot tell without more information
Q3) The inventory costing method that reports the most current prices in ending inventory is
A) FIFO
B) specific identification
C) LIFO
D) average cost
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Page 8
Chapter 7: Internal Control and Cash
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Sample Questions
Q1) Money market accounts,commercial paper,and U.S.Treasury bills are examples of cash equivalents.
A)True
B)False
Q2) For efficiency of operations and better control over cash,a company should maintain only one bank account.
A)True
B)False
Q3) The type of account and normal balance of Petty Cash is a(n)
A) revenue,credit
B) asset,debit
C) liability,credit
D) expense,debit
Q4) A petty cash fund is used to pay relatively large amounts.
A)True B)False
Q5) A customer's check received in settlement of an account receivable is considered cash.
A)True
B)False
Page 9
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Chapter 8: Receivables
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Sample Questions
Q1) Other receivables include nontrade receivables such as loans to company officers.
A)True
B)False
Q2) In accounting for uncollectible receivables,the balance in Allowance for Doubtful Accounts will directly impact the amount of the adjustment when applying which method?
A) direct write-off method
B) percentage of sales method
C) analysis of receivables method
D) both percentage of sales and analysis of receivables methods
Q3) The allowance method of estimating uncollectible accounts receivable based on an analysis of receivables shows that $640 of accounts receivable are uncollectible.The Allowance for Doubtful Accounts has a debit balance of $110.The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of:
A) $110
B) $640
C) $530
D) $750
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Chapter 9: Long-Term Assets: Fixed and Intangible
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Sample Questions
Q1) Williams Company acquired machinery on July 1,Year 1,at a cost of $130,000.The estimated useful life of the machinery was 10 years and the estimated residual value was $10,000.Williams uses the double-declining-balance method of depreciation.On October 1,Year 4,Williams sold the equipment for $75,000.
(a)Record the journal entry for the depreciation on this machinery for Year 4. (b)Record the journal entry for the sale of the machinery.
Q2) A fixed asset with a cost of $41,000 and accumulated depreciation of $36,500 is traded for a similar asset priced at $60,000.Assuming a trade-in allowance of $3,000,the recognized loss on the trade is
A) $3,000
B) $4,500
C) $500
D) $1,500
Q3) An exchange is said to have commercial substance if future cash flows remain the same as a result of the exchange.
A)True
B)False
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11
Chapter 10: Liabilities: Current,installment Notes,and
Contingencies
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Sample Questions
Q1) Salaries Payable would be recorded in the amount of
A) $8,200
B) $6,830
C) $8,630
D) $7,450
Q2) List five internal controls that relate directly to payroll.
Q3) Assuming a 360-day year,the interest charged by the bank,at the rate of 6%,on a 90-day,discounted note payable of $100,000 is
A) $6,000
B) $1,500
C) $500
D) $3,000
Q4) Current liabilities are
A) due and receivable within one year
B) due and to be paid out of current assets within one year
C) due,but not payable for more than one year
D) payable if a possible subsequent event occurs
Q5) Medicare taxes are paid by both the employee and the employer.
A)True
B)False
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Chapter 11: Liabilities: Bonds Payable
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Sample Questions
Q1) On the first day of the fiscal year,a company issues a $500,000,8%,10-year bond that pays semiannual interest of $20,000 ($500,000 × 8% × 1 / 2),receiving cash of $437,740.Journalize the entry to record the issuance of the bonds.
Q2) Bonds payable should be reported on the balance sheet at face value plus or minus any unamortized premium or discount.
A)True
B)False
Q3) When callable bonds are redeemed below the carrying amount
A) gain on redemption of bonds is credited
B) loss on redemption of bonds is debited
C) retained earnings is credited
D) retained earnings is debited
Q4) The times interest earned ratio is calculated by dividing Bonds Payable by Interest Expense.
A)True B)False
Q5) Only callable bonds can be purchased by the issuing corporation before maturity. A)True B)False
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Chapter 12: Corporations: Organization, stock Transactions, and Dividends
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Sample Questions
Q1) A large retained earnings account means that there is cash available to pay dividends.
A)True
B)False
Q2) The number of shares of outstanding stock is equal to the number of shares authorized minus the number of shares issued.
A)True
B)False
Q3) If 20,000 shares are authorized,15,000 shares are issued,and 500 shares are held as treasury stock,a cash dividend of $1 per share would amount to $15,000.
A)True
B)False
Q4) The issuance of common stock affects both paid-in capital and retained earnings. A)True B)False
Q5) For accounting purposes,stated value is treated the same way as par value. A)True
B)False
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) A corporation uses the indirect method for preparing the statement of cash flows.A fixed asset has been sold for $25,000 representing a gain of $4,500.The value in the operating activities section regarding this event would be
A) $25,000
B) $(4,500)
C) $29,500
D) $4,500
Q2) Cash flows from investing activities,as part of the statement of cash flows,would include any payments for the purchase of treasury stock.
A)True
B)False
Q3) Cash inflows and outflows are not netted in the investing or financing sections of the statement of cash flows but are separately disclosed to give the reader full information.
A)True
B)False
Q4) The statement of cash flows is not one of the basic financial statements.
A)True
B)False
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15
Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) The number of days' sales in receivables is one means of expressing the relationship between average daily sales and accounts receivable.
A)True B)False
Q2) The report on internal control required by the Sarbanes-Oxley Act of 2002 may be prepared by either management or the company's auditors.
A)True B)False
Q3) A company with $70,000 in current assets and $50,000 in current liabilities pays a $1,000 current liability.As a result of this transaction,the current ratio and working capital will
A) both decrease
B) both increase
C) increase and remain the same,respectively
D) remain the same and decrease,respectively
Q4) Define solvency and profitability.How are they alike?
Q5) The denominator of the return on total assets ratio is the average total assets. A)True B)False
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Chapter 15: Introduction to Managerial Accounting
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Sample Questions
Q1) Which of the following is most associated with managerial accounting?
A) must follow GAAP
B) may rely on estimates and forecasts
C) is prepared for users outside the organization
D) always reports on the entire entity
Q2) Sprinkles for decoration (indirect material)
A)Direct
B)Indirect
Q3) Product costs include direct labor and advertising expense.
A)True
B)False
Q4) Which of the following are basic phases of the management process?
A) supervising and directing
B) decision making and supervising
C) organizing and directing
D) planning and controlling
Q5) Product costs are not expensed until the product is sold.
A)True
B)False
Q6) Differentiate between a line department and a staff department.
Page 17
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Chapter 16: Job Order Costing
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Sample Questions
Q1) Flagler Company allocates overhead based on machine hours.It estimated overhead costs for the year to be $420,000.Estimated machine hours were 50,000.Actual hours and costs for the year were 46,000 machine hours and $380,000 of overhead.
(a)Calculate the overhead application rate for the year.
(b)What is the amount of applied overhead for the year?
(c)What is the amount of under or overapplied overhead for the year? Indicate whether it is over or underapplied.
Q2) president's salary
A)direct labor
B)direct materials
C)factory overhead
D)not a product cost
Q3) List the accounts used in the cost flow for (a)a manufacturer and (b)a service provider.
Q4) Factory overhead is applied to production using a predetermined overhead rate.
A)True
B)False
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Chapter 17: Process Cost Systems
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Sample Questions
Q1) All direct materials are placed in process at the beginning of production and the first-in,first-out method of inventory costing is used.What is the total cost of the units started and completed during the period (round unit cost calculations to four decimal places)?
A) $211,200
B) $120,060
C) $190,275
D) $20,934
Q2) In a process cost system,the amount of work in process inventory is valued by
A) finding the sum of all open job costs
B) allocating departmental costs between completed and partially completed units
C) multiplying units in ending inventory by the direct materials cost per unit
D) finding the sum of all completed jobs
Q3) Equivalent units are the sum of direct materials used and direct labor incurred.
A)True
B)False
Q4) The cost of production report reports the cost of the goods sold.
A)True
B)False
Q5) Discuss how equivalent units are computed under the average cost method.
Page 19
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Chapter 18: Activity-Based Costing
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Sample Questions
Q1) Determine the activity rate per production order for scheduling.
A) $200.00
B) $20.00
C) $29.41
D) $10.42
Q2) Service companies can effectively use multiple department overhead rate costing to compute product (service)costs.
A)True
B)False
Q3) Explain why it is imperative that proper factory overhead be allocated in factories that produce multiple products.
Q4) ABC is used to allocate selling and administrative expenses to each product based on the product's individual differences in consuming these activities.
A)True
B)False
Q5) Activity-based costing can only be used to allocate manufacturing factory overhead.
A)True
B)False
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Chapter 19: Cost-Volume-Profit Analysis
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Sample Questions
Q1) The adoption of variable costing for managerial decision making is based on the premise that fixed factory overhead costs are related to productive capacity of the manufacturing plant and are normally not affected by the number of units produced.
A)True
B)False
Q2) Trail Bikes,Inc.sells three Deluxe bikes for every seven Standard bikes.The Deluxe bike sells for $1,800 and has variable costs of $1,200.The Standard bike sells for $600 and has variable costs of $200.
Required
(a)If Trail Bikes has fixed costs that total $1,702,000,how many bikes must be sold in order for the company to break even?
(b)How many of these bikes will be Deluxe bikes and how many will be the Standard bikes?
Q3) A business had a margin of safety ratio of 20%,variable costs of 75% of sales,fixed costs of $240,000,a break-even point of $960,000,and operating income of $60,000 for the current year.Calculate the current year's sales.
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Page 21
Chapter 20: Variable Costing for Management Analysis
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Sample Questions
Q1) In contribution margin analysis,the unit price or unit cost factor is computed as:
A) the difference between the actual unit price or unit cost and the planned unit price or cost,multiplied by the planned quantity sold
B) the difference between the actual unit price or unit cost and the planned unit price or cost,multiplied by the actual quantity sold
C) the difference between the actual quantity sold and the planned quantity sold,multiplied by the planned unit sales price or unit cost
D) the difference between the actual quantity sold and the planned quantity sold,multiplied by the actual unit sales price or unit cost
Q2) In the short run,the selling price of a product should normally not be less than the variable costs and expenses of making and selling it.
A)True
B)False
Q3) Service firms can only have one activity base for analyzing changes in costs.
A)True
B)False
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Chapter 21: Budgeting
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Sample Questions
Q1) Big Wheel,Inc.collects 25% of its sales on account in the month of the sale and 75% in the month following the sale.Sales on account are budgeted to be $150,000 for March and receipts from sales on account total $162,500 in April.What are budgeted sales on account for April?
Q2) If the expected sales volume for the current period is 7,000 units,the desired ending inventory is 400 units,and the beginning inventory is 400 units,the number of units set forth in the production budget,representing total production for the current period,is A) 6,700
B) 7,400
C) 7,100
D) 7,000
Q3) When budget goals are set too tight,the budget becomes less effective as a tool for planning and controlling operations.
A)True
B)False
Q4) A capital expenditures budget is prepared before the operating budgets.
A)True
B)False
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Page 23
Chapter 22: Evaluating Variances From Standard Costs
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Sample Questions
Q1) Standards are more widely used for nonmanufacturing activities than for manufacturing activities.
A)True
B)False
Q2) A favorable cost variance occurs when
A) actual costs are more than standard costs
B) standard costs are more than actual costs
C) standard costs are less than actual costs
D) actual costs are the same as standard costs
Q3) Jaxson Corporation has the following data related to direct labor costs for September: actual costs are 10,200 hours at $15.75 per hour and standard costs are 10,800 hours at $15.50 per hour.
What is the direct labor time variance?
A) $9,300 favorable
B) $9,300 unfavorable
C) $9,450 favorable
D) $9,450 unfavorable
Q4) In most businesses,cost standards are established principally by accountants.
A)True
B)False
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Chapter 23: Evaluating Decentralized Operations
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Sample Questions
Q1) The DuPont formula uses financial information to measure the performance of a business.
A)True
B)False
Q2) In an investment center,the manager has the responsibility for and the authority to make decisions that affect
A) the assets invested in the center,but not costs and revenues
B) costs and assets invested in the center,but not revenues
C) both costs and revenues for the department or division
D) costs,revenues,and assets invested in the center
Q3) Three measures of investment center performance are income from operations,rate of return on investment,and residual income.
A)True
B)False
Q4) How much service department cost would be allocated to the Macro Division?
A) $405,000
B) $175,000
C) $130,000
D) $305,000
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Chapter 24: Differential Analysis and Product Pricing
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Sample Questions
Q1) What is the target cost of the company's product?
A) $44
B) $42
C) $43
D) $40
Q2) Mighty Safe Fire Alarm is currently buying 50,000 motherboards from MotherBoard,Inc.at a price of $65 per board.Mighty Safe is considering making its own boards.The costs to make the board are as follows: direct materials,$32 per unit; direct labor,$10 per unit; and variable factory overhead,$16.00 per unit.Fixed costs for the plant would increase by $75,000.Which option should be selected and why?
A) buy,$75,000 more in profits
B) make,$275,000 increase in profits
C) buy,$275,000 more in profits
D) make,$350,000 increase in profits
Q3) If the order is accepted,what would be the impact on net income?
A) decrease of $750
B) decrease of $4,500
C) increase of $3,000
D) increase of $1,500
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Page 26
Chapter 25: Capital Investment Analysis
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Sample Questions
Q1) In capital rationing,an initial screening of alternative proposals is usually performed by establishing minimum standards.Which of the following evaluation methods are often used?
A) cash payback method and average rate of return method
B) average rate of return method and net present value method
C) net present value method and cash payback method
D) internal rate of return and net present value methods
Q2) Uses present value concepts to compute the rate of return on an investment from a capital investment proposal based on its' expected net cash flows
A)Capital rationing
B)Annuity
C)Capital investment analysis
D)Internal rate of return method
E)Payback period
F)Accounting rate of return
Q3) The excess of the cash flowing in from revenues over the cash flowing out for expenses is termed net discounted cash flow.
A)True
B)False
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Chapter 26: Lean Manufacturing and Activity Analysis
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Sample Questions
Q1) Within-batch wait time increases total lead time.
A)True
B)False
Q2) From the above schedule of activity costs,determine the internal failure costs.
A) $37,000
B) $25,000
C) $8,000
D) $33,000
Q3) Setups are a significant time-consuming activity in traditional production environments.
A)True
B)False
Q4) Which of the following are features of the lean manufacturing system?
(a)maintaining excess inventory to ensure that products will always be available
(b)cross training of employees
(c)giving employees additional authority and responsibility
(d)product-oriented layout
(e)increased set-up time
Q5) From the above schedule,calculate the (a)prevention and (b)appraisal costs.
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