Introduction to Business Exam Bank
Course Introduction
Introduction to Business offers a comprehensive overview of modern business concepts, practices, and environments. Students will explore core topics such as management, marketing, accounting, finance, entrepreneurship, human resources, and business ethics. The course emphasizes the foundational knowledge and skills needed to understand how businesses operate, adapt to market changes, and contribute to the global economy. Through real-world examples and case studies, students gain insights into the decision-making processes within various business functions, preparing them for further study or entry-level positions in the business field.
Recommended Textbook
Financial Accounting Information for Decisions 7th Edition by John J Wild
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Page 2
Chapter 1: Introducing Financial Accounting
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Sample Questions
Q1) Technological advancement
A)Has replaced accounting.
B)Has not changed the work that accountants do.
C)Has freed accounting professionals to concentrate more on the analysis and interpretation of information.
D)In accounting has replaced the need for decision makers.
E)In accounting is only available to large corporations.
Answer: C
Q2) Viscount Company collected $42,000 cash on its accounts receivable.How does this transaction affect the company's accounting equation?
A)Assets decrease and equity increases
B)Both assets and liabilities decrease
C)Assets,liabilities,and equity are unchanged
D)Both assets and equity are unchanged and liabilities increase
E)Assets increase and equity decreases
Answer: C
Q3) Della's Donuts has revenues of $83,000 and expenses of $64,000.Calculate its net income.
Answer: Net income = $83,000 - $64,000 = $19,000.
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Page 3
Chapter 2: Accounting System and Financial Statements
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Sample Questions
Q1) Debit means the right-hand side of any account.
A)True
B)False
Answer: False
Q2) A ___________________ is a record containing all accounts for a company along with their balances.
Answer: general ledger (or ledger)
Q3) Unearned revenues are:
A)Revenues that have been earned and received in cash.
B)Revenues that have been earned but not yet collected in cash.
C)Liabilities created when a customer pays in advance for products or services before the revenue is earned.
D)Recorded as an asset in the accounting records.
E)Increases to retained earnings.
Answer: C
Q4) Double-entry accounting requires that the impact of each transaction be recorded in at least two accounts.
A)True
B)False
Answer: True
Page 4
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Chapter 3: Adjusting Accounts for Financial Statements
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Sample Questions
Q1) A publishing company records the subscriptions paid in advance by its customers in an account called Unearned Subscription Revenue.If the company fails to make the end-of-period adjusting entry to record the portion of the subscriptions that have been earned,one effect will be an:
A)Overstatement of equity.
B)Overstatement of liabilities.
C)Understatement of assets.
D)Understatement of liabilities.
E)Overstatement of assets.
Answer: B
Q2) Describe a work sheet and explain why it is useful.
Answer: A work sheet is a useful tool for organizing the preparation and analysis of financial statements.It contains five pairs of debit and credit columns for the trial balance,adjusting entries,adjusted trial balance,income statement accounts,and balance sheet accounts.
Q3) The current portion of long-term debt is classified with the _________________________.
Answer: current liabilities
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Chapter 4: Reporting and Analyzing Merchandising Operations
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Sample Questions
Q1) The profit margin ratio is gross margin divided by total assets.
A)True
B)False
Q2) A perpetual inventory system is able to directly measure and monitor inventory shrinkage.
A)True
B)False
Q3) J.C.Penny had net sales of $28,496 million,cost of goods sold of $19,092 million,and net income of $997 million.Its gross margin ratio equals:
A)3.5%.
B)5.2%.
C)33%.
D)67%.
E)149.3%.
Q4) Explain the cost flows and operating activities of a merchandising company.
Q5) J.C.Penney had net sales of $24,750 million,cost of goods sold of $16,150 million,and net income of $837 million.Its gross margin ratio equals 3.4%.
A)True
B)False
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Chapter 5: Reporting and Analyzing Inventories
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Sample Questions
Q1) In the retail inventory method of inventory valuation,the retail amount of inventory refers to the dollar amount measured by looking at the selling prices of inventory items.
A)True
B)False
Q2) A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500.Its inventory turnover equals 3.4.
A)True
B)False
Q3) Given the following information,determine the cost of goods sold at November 30 using the weighted average perpetual inventory method.
November 3: 15 units were purchased at $8 per unit.
November 11: 18 units were purchased at $9.50 per unit.
November 15: 15 units were sold at $45 per unit.
November 18: 30 units were purchased at $10.75 per unit.
November 30: 20 units were sold at $55 per.
Q4) The ______________________ method of assigning costs to inventory and cost of goods sold is usually only practical for companies with expensive,custom-made inventory.
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Page 7
Chapter 6: Reporting and Analyzing Cash and Internal Controls
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Sample Questions
Q1) The accountant for Wade Inc.prepared the bank reconciliation when the December 31 bank statement was received in the mail.The accountant discovered an error when preparing the reconciliation.A check received from Susan Akins,a customer,as payment on her account in the amount of $120 was recorded in the company's books at $210.How would the company record the required adjusting entry for this item?
A)Debit Cash for $90 and credit Accounts Payable- Susan Akins for $90.
B)Debit Cash for $90 and credit Accounts Receivable - Susan Akins for $90.
C)Debit Accounts Payable - Susan Akins for $90 and credit Cash for $90.
D)Debit Accounts Receivable - Susan Akins for $90 and credit Cash for $90.
E)Debit Cash for $210,debit Accounts Receivable - Susan Akins for $120,and credit NSF Check Expense for $90.
Q2) Internal control systems used to monitor and control operations are a low priority for managers within the company.
A)True
B)False
Q3) _________________________ is the electronic transfer of cash from one party to another.
Q4) Explain the differences between cash and cash equivalents.
Q5) List the main principles of internal controls.
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Chapter 7: Reporting and Analyzing Receivables
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Sample Questions
Q1) Outdoors Unlimited accepts the Explorer credit card from its customers.Explorer charges a 3.5% service fee and pays Outdoors Unlimited the amount net of Explorer charges once a month.During February,Outdoors Unlimited sold $27,000 worth of merchandise to customers using the Explorer charge card.On February 28,Outdoor Unlimited sent the $27,000 worth of credit card receipts to Explorer.On March 4,Outdoors Unlimited received cash proceeds from Explorer for the February credit sales less the service charge.Prepare the general journal entries to record February sales and the March 4 cash receipt.
Q2) A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:
A)Direct write-off method.
B)Aging of accounts receivable method.
C)Percent of sales method.
D)Aging of investments method.
E)Percent of accounts receivable method.
Q3) The _______________________ method uses both past and current receivables to estimate the allowance amount and assumes that the longer an amount is past due,the more likely it is to be uncollectible.
Q4) Explain the options a company has when converting its receivables to cash.
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Chapter 8: Reporting and Analyzing Long-Term Assets
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Sample Questions
Q1) Depreciation:
A)Measures the decline in market value of an asset.
B)Measures physical deterioration of an asset.
C)Is the process of allocating to expense the cost of a plant asset.
D)Is an outflow of cash from the use of a plant asset.
E)Is applied to land.
Q2) Beauty Company purchased a machine valued at $565,000 on September 1.The equipment has an estimated useful life of eight years or 5.5 million units.The equipment is estimated to have a salvage value of $48,300.Assuming the double declining balance method of depreciation is used,what is depreciation expense that needs to be recorded at the end of the second year?
Q3) Revenue expenditures:
A)Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities.
B)Are known as balance sheet expenditures.
C)Extend the asset's useful life.
D)Substantially benefit future periods.
E)Are debited to asset accounts.
Q4) Define plant assets and identify the four primary issues in accounting for them.
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Chapter 9: Reporting and Analyzing Current Liabilities
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Sample Questions
Q1) A short-term note payable is a written promise to pay a specified amount on a definite future date within one year or the operating cycle,whichever is longer.
A)True
B)False
Q2) A company borrowed $60,000 on a 60-day,10% note payable from its bank.Compute the total cash payment at the note's maturity.
Q3) Accounts payable:
A)Are amounts owed to suppliers for products and/or services purchased on credit.
B)Are long-term liabilities.
C)Are estimated liabilities.
D)Do not include specific due dates.
E)Must be paid within 30 days.
Q4) What are estimated liabilities? Provide at least two examples and explain why they are classified as estimated liabilities.
Q5) Cooper Company borrows $785,100 cash on November 1,2013,by signing a 120-day,8% note.What amount of interest expense should Cooper recognize in 2013?
Q6) Gross pay less all deductions is called ____________________.
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Page 11
Chapter 10: Reporting and Analyzing Long-Term Liabilities
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Sample Questions
Q1) Explain the amortization of a bond discount.Identify and describe the amortization methods available.
Q2) The Premium on Bonds Payable account is a(n):
A)Revenue account.
B)Adjunct or accretion liability account.
C)Contra revenue account.
D)Asset account.
E)Contra expense account.
Q3) Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as:
A)Convertible bonds
B)Sinking fund bonds
C)Callable bonds
D)Serial bonds
E)Junk bonds
Q4) A company with liabilities of $2,816,000 and equity of $826,000 has a debt to equity ratio equal to 29.33%
A)True
B)False
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Chapter 11: Reporting and Analyzing Equity
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Sample
Questions
Q1) Jennings Corp.has 1,000,000 shares of $1 par value stock authorized,200,000 shares issued,and 150,000 shares outstanding.On June 1,2014,Jennings' Board of Directors declared a 10% stock dividend.At that time,the stock had market value of $30.How would the company record this transaction?
A)Debit Retained Earnings for $15,000 and credit Common Stock Dividend Distributable for $15,000.
B)Debit Retained Earnings for $450,000,credit Common Stock Dividend Distributable for $15,000,and credit Paid-In Capital in Excess of Par Value,Common Stock for $435,000.
C)Debit Common Stock Dividend Distributable for $450,000 and credit Common Stock,$1 Par Value for $450,000.
D)Debit Common Stock Dividend Distributable for $435,000 and credit Common Stock,$1 Par Value for $435,000.
E)Debit Common Stock Dividend Distributable for $15,000 and credit Common Stock,$1 Par Value for $15,000.
Q2) How is the retirement of stock recorded?
Q3) A stock option is also called a stock dividend.
A)True B)False
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13
Chapter 12: Reporting and Analyzing Cash Flows
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Sample Questions
Q1) Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000.This implies that $90,000 cash was received from the sale.
A)True
B)False
Q2) The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts,such as receipts from customers,and subtracts the major items of operating cash disbursements,such as cash paid for merchandise,is referred to as the:
A)Direct method of reporting net cash provided or used by operating activities.
B)Cash basis of accounting.
C)Classified statement of cash flows.
D)Indirect method of reporting net cash provided or used by operating activities.
E)Net method of reporting cash flows from operating activities.
Q3) The FASB requires the reporting of cash flows per share as a measure of earnings performance.
A)True
B)False
Q4) Explain how to determine cash flows from investing and financing activities.
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Page 14
Chapter 13: Analyzing and Interpreting Financial Statements
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Sample Questions
Q1) Comparative horizontal analysis is used to reveal patterns in data covering successive periods.
A)True
B)False
Q2) The return on total assets can be calculated as the profit margin times the total asset turnover.
A)True
B)False
Q3) What is Corona Company's accounts receivable turnover ratio for 2013,assuming net sales for the period were $1,236,783?
A)27.21
B)25.99
C)22.91
D)30.05
E)15.85
Q4) Expropriation of property by a foreign government is considered an extraordinary item.
A)True
B)False
Q5) Describe ratio analysis including its purpose,application,and interpretation.
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Chapter 14: Applying Present and Future Values
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Sample Questions
Q1) The number of periods in a future value calculation can only be expressed in years.
A)True
B)False
Q2) A company is beginning a savings plan.It will save $15,000 per year for the next 10 years.How much will the company have accumulated after the tenth year-end deposit,assuming the fund earns 10% interest?
Q3) An ordinary annuity refers to a series of equal payments made or received at the end of equal intervals.
A)True
B)False
Q4) Future value can be found if the interest rate (i),the number of periods (n),and the present value (p) are known.
A)True
B)False
Q5) What is interest?
Q6) A company borrows money from the bank by promising to make six annual year-end payments of $25,000 each.How much is the company able to borrow if the interest rate is 9%?
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Chapter 15: Investments and International Operations
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Sample Questions
Q1) An increase in the price of the U.S.dollar against other currencies puts U.S.companies in a stronger competitive position internationally.
A)True
B)False
Q2) A company purchased $60,000 of 5% bonds on May 1.The bonds pay interest on February 1 and August 1.The amount of interest accrued on December 31 (the company's year-end) would be:
A)$250
B)$500
C)$1,250
D)$2,500
E)$3,000
Q3) A company had net income of $450,000 in 2012 and $620,000 in 2013.The company had average total assets of $2,500,000 in 2012 and $3,000,000 in 2013.Calculate the return on total assets for 2012 and 2013.Comment on the results.
Q4) Bond sinking funds are examples of short-term investments.
A)True
B)False
Q5) Explain how to record the sale of trading securities.
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Chapter 16: Accounting for Partnerships
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Sample Questions
Q1) A capital deficiency exists when all partners have a credit balance in their capital accounts.
A)True
B)False
Q2) When a partner leaves a partnership,the withdrawing partner is entitled to a bonus if the recorded equity is overstated.
A)True
B)False
Q3) Partners' withdrawals of assets are:
A)Credited to their withdrawals accounts.
B)Debited to their withdrawals accounts.
C)Credited to their retained earnings.
D)Debited to their retained earnings.
E)Debited to their asset accounts.
Q4) Salary allowances are reported as salaries expense on a partnership income statement.
A)True
B)False
Q5) The life of a partnership is ____________________ in duration.
Q6) How are partners' investments in a partnership recorded?
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Chapter 17: Accounting With Special Journals
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Sample Questions
Q1) Equipment,inventory,and investments can each have its own subsidiary ledger.
A)True
B)False
Q2) The ledger that contains the financial statement accounts of a company is the:
A)General ledger
B)General journal
C)Special ledger
D)Special journal
E)Column balance ledger
Q3) The SAP enterprise resource planning software is already being used to help direct the operations of many of the world's largest companies.
A)True
B)False
Q4) The Accounts Payable account in the general ledger is:
A)A controlling account for the subsidiary accounts payable ledger.
B)The account that controls the purchases journal.
C)The subsidiary account to the purchases journal.
D)Part of a special journal.
E)Part of a subsidiary ledger.
Q5) What are the five basic components of accounting information systems?
Page 19
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