Introduction to Accounting
Textbook Exam Questions
Course Introduction
Introduction to Accounting provides students with the foundational concepts and principles of accounting, focusing on the role accounting plays in the business environment. This course covers essential topics such as the accounting cycle, preparation and analysis of financial statements, the use of accounting information in decision-making, and basic bookkeeping procedures. Students will also gain an understanding of how accounting standards and ethical considerations influence financial reporting. By the end of the course, learners will be equipped with the skills to interpret accounting information and understand its importance for individuals, businesses, and society as a whole.
Recommended Textbook
Survey of Accounting 5th Edition by Carl
S. Warren
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Chapter 1: The Role of Accounting in Business
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Sample Questions
Q1) A corporation is a business that is legally separate and distinct from its owners.
A)True
B)False
Answer: True
Q2) If there was no beginning retained earnings,net income of $20,000,and ending retained earnings of $6,000,how much were dividends?
A)$10,000
B)$4,000
C)$6,000
D)$14,000
Answer: D
Q3) Debts owed by a business are referred to as A)accounts receivable.
B)equities.
C)stockholders' equity.
D)liabilities.
Answer: D
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Chapter 2: Basic Accounting Concepts
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Sample Questions
Q1) The two sides of the accounting equation do NOT have to be equal.
A)True
B)False
Answer: False
Q2) ABC Company deposited $20,000 in a bank account in return for issuing shares in the corporation.This transaction would affect which two financial statement elements?
A)Assets and stockholders' equity
B)Assets and liabilities
C)Liabilities and stockholders' equity
D)None of these
Answer: A
Q3) For EFG Co. ,the transaction "Receipt of interest income" would
A)increase total assets.
B)decrease total assets.
C)have no effect on total assets.
D)decrease total liabilities.
Answer: A
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Chapter 3: Accrual Accounting Concepts
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Sample Questions
Q1) Describe the differences between the cash and accrual bases of accounting.
Answer: Under the cash basis of accounting,transactions are recorded when cash is affected.Revenue is recognized when cash is received,and expenses are recorded when cash is paid.Under accrual accounting,transactions are recorded as they occur,not just when cash is affected.Thus,revenue is recognized when it is earned.Expenses are recorded when they are incurred.
Q2) On June 1,Green Pea,Inc.purchased $1,200 worth of supplies on account.Prior to the purchase,the balance in the supplies account was $0.On December 31,the fiscal year-end for Green Pea,it is determined that $500 of supplies have been used up.What is the balance in the supplies account after adjustment?
A)$0
B)$700
C)$500
D)$1,200
Answer: B
Q3) Under the cash basis of accounting,expenses are recorded when paid.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Accounting for Merchandising Businesses
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Sample Questions
Q1) A buyer who acquires merchandise under credit terms of 1/10,n/30 has 10 days after the invoice date to take advantage of the cash discount.
A)True
B)False
Q2) If payment is due by the end of the month in which the sale is made,the invoice terms are expressed as n/eom.
A)True
B)False
Q3) Net income or loss may appear on the income statement of both a service business and a merchandising business.
A)True
B)False
Q4) Which of the following is NOT considered when figuring net purchases?
A)Cost of goods sold
B)Purchase returns
C)Purchases discounts
D)Purchases
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6
Chapter 5: Sarbanes-Oxley,internal Control,and Cash
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Sample Questions
Q1) Employing internal auditors is part of which element of internal control?
A)Monitoring
B)Control procedures
C)Risk assessment
D)The control environment
Q2) There are two internal control objectives: to ensure accurate financial reports,and to ensure compliance with applicable laws.
A)True
B)False
Q3) Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the depositor.This item is a(n)
A)deduction from the balance per depositor's records.
B)addition to the balance per bank statement.
C)deduction from the balance per bank statement.
D)addition to the balance per depositor's records.
Q4) For efficiency of operations and better control over cash,a company should maintain only one bank account.
A)True
B)False
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Chapter 6: Receivables and Inventories
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Sample Questions
Q1) The person who is to be paid when a note matures is called the payee.
A)True
B)False
Q2) After the accounts are adjusted and closed at the end of the fiscal year,Accounts Receivable has a balance of $430,000 and Allowance for Doubtful Accounts has a balance of $30,000.What is the net realizable value of the accounts receivable?
A)$30,000
B)$460,000
C)$430,000
D)$400,000
Q3) Cost is a method of inventory valuation.
A)True
B)False
Q4) The maturity value of a 12%,60-day note for $1,000 is $1,020.
A)True
B)False
Q5) The due date on a 90-day note dated June 10 is September 8.
A)True
B)False
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Chapter 7: Fixed Assets and Intangible Assets
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Sample Questions
Q1) Other descriptive titles for fixed assets would include A)plant assets.
B)property,plant,and equipment.
C)other long-term assets
D)both plant assets and property,plant,and equipment.
Q2) Physical depreciation occurs when a fixed asset is no longer able to provide services at the level for which it was intended.
A)True
B)False
Q3) A company purchased an oil well for $25 million with a residual value of $500,000.It is estimated that 10 million barrels can be extracted from the well.Determine depletion expense assuming 3 million barrels are extracted and sold.
A)$7,350,000
B)$7,500,000
C)$5,000,000
D)$7,650,000
Q4) Fixed assets may be shown at book value on the balance sheet.
A)True
B)False
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Chapter 8: Liabilities and Stockholders Equity
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Sample Questions
Q1) When a corporation issues bonds,it executes a contract with the bondholders known as a bond debenture.
A)True
B)False
Q2) Before a stock dividend can be declared or paid,there must be sufficient cash.
A)True
B)False
Q3) For accounting purposes,stated value is treated the same way as par value.
A)True
B)False
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) One of the prerequisites usually required to pay a cash dividend is sufficient retained earnings.
A)True
B)False
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Chapter 9: Financial Statement Analysis
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Sample Questions
Q1) The number of times interest charges are earned is computed as A)net income plus interest charges,divided by interest charges.
B)income before income tax plus interest charges,divided by interest charges.
C)net income divided by interest charges.
D)income before income tax divided by interest charges.
Q2) The tendency of the rate earned on stockholders' equity to vary disproportionately from the rate earned on total assets is sometimes referred to as A)leverage.
B)solvency.
C)yield.
D)quick assets.
Q3) If a firm has an quick ratio of 1,the subsequent payment of an account payable will cause the ratio to increase.
A)True
B)False
Q4) The effects of differences in accounting methods are of little importance when analyzing comparable data from competing businesses.
A)True
B)False
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Chapter 10: Accounting Systems for Manufacturing
Businesses
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Sample Questions
Q1) A summary of the materials requisitions completed during a period serves as the basis for transferring the cost of the materials from the materials account to A)work in process and cost of goods sold.
B)work in process and factory overhead.
C)finished goods and cost of goods sold.
D)work in process and finished goods.
Q2) Job order cost systems can be used to compare unit costs of similar jobs to determine if costs are staying within expected ranges.
A)True
B)False
Q3) The cost of a manufactured product generally consists of direct materials cost,direct labor cost,and factory overhead cost.
A)True
B)False
Q4) As product costs are incurred in the manufacturing process,they are accounted for as assets and reported on the balance sheet as inventory.
A)True
B)False
Page 12
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Chapter 11: Cost Behavior and Cost-Volume-Profit Analysis
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Sample Questions
Q1) Assuming that last year's fixed costs totaled $910,000,what was Kennedy Co.'s break-even point in units?
A)9,100 units
B)13,000 units
C)13,227 units
D)13,542 units
Q2) Assume that Crowson Co.sold 8,000 units of Product A and 2,000 units of Product B during the past year.The unit contribution margins for Products A and B are $20 and $45,respectively.Crowson has fixed costs of $350,000.The break-even point in units is
A)14,000 units.
B)25,278 units.
C)8,000 units.
D)10,769 units.
Q3) A rental cost of $40,000 plus $0.50 per machine hour of use is an example of a mixed cost.
A)True
B)False
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Chapter 12: Differential Analysis and Product Pricing
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Sample Questions
Q1) Eliminating a product or segment may have the long-term effect of reducing fixed costs.
A)True
B)False
Q2) Matthews Company is considering replacing equipment that originally cost $250,000 and that has $225,000 accumulated depreciation to date.A new machine will cost $500,000,and the old equipment can be sold for $6,000.What is the sunk cost in this situation?
A)$225,000
B)$25,000
C)$250,000
D)$0
Q3) If the total unit cost of manufacturing Product Y is currently $40 and the total unit cost after modifying the style is estimated to be $48,the differential cost for this situation is $48.
A)True B)False
Q4) A cost that will not be affected by later decisions is termed a sunk cost.
A)True
B)False
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Chapter 13: Budgeting and Standard Cost Systems
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Sample Questions
Q1) Favorable volume variances are never harmful since achieving them encourages managers to run the factory above normal capacity.
A)True
B)False
Q2) If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12,the direct materials price variance was $800 favorable.
A)True
B)False
Q3) Variances from standard costs are usually reported to A)suppliers.
B)stockholders.
C)management.
D)creditors.
Q4) If the standard to produce a given amount of product is 500 direct labor hours at $15 and the actual was 600 hours at $17,the rate variance was $1,200 favorable.
A)True
B)False
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Chapter 14: Performance Evaluation for Decentralized Operations
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Sample Questions
Q1) How do the responsibilities of a manager in an investment center compare to the responsibilities of a cost or profit center?
A)Investment center managers have more authority and responsibility than managers of a cost or profit center.
B)Investment center managers have more authority and responsibility than managers of a cost center but less than managers of a profit center.
C)Investment center managers have about the same authority and responsibility than managers of a cost or profit center.
D)Investment center managers have more authority and responsibility than managers of a profit center but less than managers of a cost center.
Q2) Identify the formula for the rate of return on investment.
A)Invested Assets/Income From Operations
B)Sales/Invested Assets
C)Income From Operations/Sales
D)Income From Operations/Invested Assets
Q3) The ratio of sales to invested assets is termed investment turnover.
A)True
B)False
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Chapter 15: Capital Investment Analysis
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Sample Questions
Q1) The expected average rate of return for a proposed investment of $540,000 in a fixed asset,with a useful life of four years,straight-line depreciation,no residual value,and an expected total net income of $216,000 for the 4 years,is
A)18%.
B)15%.
C)27%.
D)20%.
Q2) All of the following qualitative considerations may impact upon capital investments analysis EXCEPT
A)manufacturing productivity.
B)manufacturing sunk cost.
C)manufacturing flexibility.
D)manufacturing control.
Q3) The process by which management plans,evaluates,and controls long- term investment decisions involving fixed assets is called cost-volume-profit analysis.
A)True
B)False
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