Introduction to Business Review Questions
Course Introduction
Introduction to Business provides students with a comprehensive overview of the foundational concepts and operations involved in the modern business environment. The course explores major topics such as organizational structures, management principles, marketing, finance, human resources, and entrepreneurship. Students are introduced to the dynamics of decision-making, ethics, and the impact of globalization on business practices. By analyzing real-world examples and case studies, learners develop an understanding of how businesses function, grow, and adapt in a changing economy, preparing them for further study or entry-level roles in the business world.
Recommended Textbook Principles of Accounting 12th Edition by Belverd E. Needles
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Page 2
Chapter 1: Accounting Principles and the Financial Statements
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Sample Questions
Q1) The Sarbanes-Oxley Act orders the SEC to hold chief executives and CFOs responsible for the accuracy of their company's financial statements.
A)True
B)False
Answer: True
Q2) The statement of owner's equity discloses the owner's withdrawals made during the period.
A)True
B)False
Answer: True
Q3) What is the responsibility of the independent auditor? Who is responsible for the content of the published financial statements?
Answer: The responsibility of the independent auditor is to express an opinion about the financial statements of the company being audited.Company's management is responsible for the content of the published financial statements.
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Page 3
Chapter 2: Analyzing and Recording Business Transactions
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Sample Questions
Q1) When the columns of the trial balance equal each other,it is still possible that errors may have occurred in recording and posting the transactions.
A)True
B)False
Answer: True
Q2) In a trial balance,all debits are listed before all credits.
A)True
B)False
Answer: False
Q3) A decrease in the Owner's Capital account is recorded with a debit.
A)True
B)False
Answer: True
Q4) Which of the following business events is not a transaction
A)Signing a contract.
B)Paying wages.
C)Receiving goods.
D)Purchasing a service.
Answer: A
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Chapter 3: Adjusting the Accounts
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Sample Questions
Q1) Custom Realty Services sold a house for a client and will be paid a commission for its services.Using the SEC's four conditions or revenue recognition,explain why Custom Realty Services either should or should not recognize the revenue now.
Answer: Custom Realty Services should recognize the revenue now because:
1.The company and the client agree that the customer owes for the service (pervasive evidence of an arrangement exists).
2.The service has been rendered (a product or service has been delivered).
3.Both parties understand the price (the seller's price to the buyer is fixed or determinable)
4.There is a reasonable expectation that the client will pay the bill (collectibility is reasonably assured).
Q2) The periodicity assumption recognizes that
A)the company may continue indefinitely.
B)all financial statements should cover a fiscal year.
C)net income is an estimate.
D)the value of an asset may vary from month to month.
Answer: C
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) On the work sheet,under what circumstances will the last two columns be in balance after the initial footing?
A)Under all circumstances,assuming no arithmetical errors have been made
B)When net income is zero
C)When no adjustments have been entered on the work sheet
D)Under no circumstances
Q2) IFRS are important to multinational companies because
A)if they can use IFRS for all their operations,it would simplify the process of preparing financial statements.
B)it would lower their taxes in each country in which they do business.
C)it would enable them to achieve higher profitability due to the different reporting standards under IFRS.
D)All of these choices.
Q3) When the Balance Sheet columns of the work sheet are initially footed,they should be in balance.
A)True
B)False
Q4) Briefly distinguish between adjusting and closing entries.
Q5) What two broad purposes do closing entries serve?
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Chapter 5: Foundations of Financial Reporting and the
Classified Balance Sheet
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Sample Questions
Q1) Profitability means having enough cash on hand to pay bills when they become due.
A)True
B)False
Q2) Natural resources,such as coal mines and oil wells,are classified as intangible assets.
A)True
B)False
Q3) Why is it important for a company to maintain the same accounting methods and practices from period to period?
Q4) General-purpose external financial statements that are divided into subcategories are called classified financial statements.
A)True
B)False
Q5) A debt to equity ratio of 0.5 means that one-third of a company's total assets are financed by creditors.
A)True
B)False
Q6) State the definition of a current asset.
Page 7
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Chapter 6: Accounting for Merchandising Operations
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Sample Questions
Q1) Which of the following goods would not be included in merchandise inventory for a purchasing company?
A)Goods in transit shipped FOB shipping point
B)Goods on hand in the showroom
C)Goods in transit shipped FOB destination
D)Goods ordered and received from the supplier
Q2) The other revenues and expenses section of a multistep income statement could include all the following except
A)interest expense.
B)interest income.
C)dividend income.
D)insurance expense.
Q3) Which of the following is necessary for computing cost of goods sold but not necessary for computing the cost of goods available for sale?
A)Freight-in
B)Purchases
C)Ending merchandise inventory
D)Beginning merchandise inventory
Q4) Describe how to compute the cost of goods available for sale.
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Chapter 7: Inventories
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Sample Questions
Q1) Assume that during the physical count of the inventory of a large corporation for this year,$450,000 of merchandise was counted twice.The error was not detected,and the financial statements were prepared.Identify the individual statements that would be affected and explain the effect the count error would have on each.(Omit income tax considerations. )
Q2) A manufacturer's inventory consists of raw materials,work in process,and finished goods.
A)True
B)False
Q3) Goods held on consignment are
A)kept for sale on the premises of the consignee.
B)included as part of no one's ending inventory.
C)owned by the consignee.
D)included in the consignee's ending inventory.
Q4) Which costing method will produce different results under perpetual and periodic systems?
A)Specific identification
B)Average-cost
C)FIFO
D)Both FIFO and specific identification
Page 9
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Chapter 8: Cash and Internal Control
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Sample Questions
Q1) Which of the following sets of documents are in the correct sequence?
A)Purchase order,check,receiving report
B)Purchase requisition,purchase order,invoice
C)Purchase requisition,receiving report,purchase order
D)Purchase order,purchase requisition,invoice
Q2) The petty cash fund should be replenished
A)only for the total amount of expense receipts on hand.
B)for the total amount that was originally set up in the imprest fund.
C)for the total amount of expense receipts on hand plus cash remaining before replenishment.
D)for the amount needed to bring the petty cash fund back to its imprest amount.
Q3) The entry to establish the petty cash fund would include a
A)debit to the Cash account for $250.
B)debit to the Petty Cash account for $250.
C)memorandum entry only in the ledger.
D)credit to the Petty Cash account for $250.
Q4) The purchasing department prepares a purchase requisition addressed to the vendor (seller)containing instructions related to the items ordered.
A)True
B)False
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Chapter 9: Receivables
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Sample Questions
Q1) If the amount of uncollectible accounts expense is understated at year end,
A)net Accounts Receivable will be understated.
B)total liabilities will be overstated.
C)net income will be understated.
D)Allowance for Uncollectible Accounts will be understated.
Q2) A company's acceptance of credit cards,like MasterCard,is an example of factoring with recourse.
A)True
B)False
Q3) The balance of Accounts Receivable,net of the allowance account,is $25,000 before the write-off of a $2,000 account.What is the Accounts Receivable balance,net of the allowance account,after the write-off?
A)$2,000
B)$23,000
C)$25,000
D)$27,000
Q4) The higher the receivables turnover,the lower the days' sales uncollected.
A)True
B)False
Q5) Explain the two methods used to estimate uncollectible accounts.
Page 11
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Chapter 10: Long -Term Assets
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Sample Questions
Q1) Group depreciation is an appropriate method for a large company calculating depreciation on office equipment.
A)True
B)False
Q2) When a company can prove it is worth more than its balance sheet indicates,it may record some goodwill.
A)True
B)False
Q3) Equipment is purchased for $60,000.It has a five-year useful life and a $10,000 residual value.Under the double-declining-balance method,what is the depreciation expense for year 3?
A)$6,400
B)$7,200
C)$7,680
D)$8,640
Q4) Intangible assets are subject to a process called depreciation. A)True
B)False
Q5) Present two arguments in favor of the use of accelerated depreciation.
Q6) What commitments must a company account for in determining its free cash flow?
Page 12
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Chapter 11: Current Liabilities and Fair Value Accounting
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Sample Questions
Q1) Product warranties are an expense of the period in which the product is sold.
A)True
B)False
Q2) Fergus Company is considering the purchase of a machine that will save the company $4,000 per year in operating costs for a period of seven years.The most it should pay for the machine is equal to
A)$4,000 times the present value of an ordinary annuity for 7 periods.
B)$28,000.
C)$4,000 divided by the future value of a single sum at the end of 7 periods.
D)$4,000 times the future value of an ordinary annuity for 7 periods.
Q3) A liability for dividends exists only when the board of stockholders requests them.
A)True
B)False
Q4) The future value of an ordinary annuity table would not include the factor
A)0.909.
B)2.010.
C)20.300.
D)1.000.
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Page 13
Chapter 12: Accounting for Partnerships
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Sample Questions
Q1) If the asset accounts did not reflect their current values,the asset accounts would need to be adjusted before admitting the new partner.
A)True
B)False
Q2) Liabilities related to assets invested in a partnership by a new partner can be transferred to the partnership.
A)True
B)False
Q3) In a limited partnership,the general partner's liability is unlimited.
A)True
B)False
Q4) The division of partnership profits on the basis of salaries,interest,and a stated ratio is usually necessary because
A)partners seldom contribute time,effort,and resources equally.
B)this prevents arguments among the partners.
C)this reflects the amount of time devoted to the partnership by the partners.
D)most states require this method of distribution.
Q5) Describe how a dissolution of a partnership is different from a liquidation of a partnership.
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Chapter 13: Accounting for Corporations
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Sample Questions
Q1) The number of shares of issued stock equals
A)unissued shares minus authorized shares.
B)outstanding shares plus treasury shares.
C)subscribed shares plus outstanding shares.
D)authorized shares minus treasury shares.
Q2) When the date of declaration and the payment date occur in the same period,the amount of dividends shown on the statement of stockholders' equity and on the statement of cash flows will be equal.
A)True
B)False
Q3) When common stock is issued by a corporation for a cash price above par value,the excess of the cash proceeds over the par value should be reported in the financial statements as a component of
A)retained earnings on the balance sheet.
B)total liabilities on the balance sheet.
C)operating income on the income statement.
D)total contributed capital on the balance sheet.
Q4) The number of outstanding shares should exceed the number of authorized shares. A)True
B)False
Page 15
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Chapter 14: Long Term Liabilities
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Sample Questions
Q1) When determining the value of a bond using present value,what are the two components used in the calculation?
Q2) Which of the following is an example of off-balance-sheet financing?
A)Leases
B)Bonds
C)Dividends
D)Notes
Q3) Term bonds are of shorter duration than serial bonds.
A)True
B)False
Q4) Under a defined benefit pension plan,
A)actuarial computations are unnecessary.
B)accounting for annual pension expense is simple.
C)retirement payments are based on the amount accumulated in the pension fund.
D)the employer guarantees the employees certain benefits upon retirement.
Q5) If the market interest rate at the date of issuance of a bond exceeds the face interest rate,the bond will probably be sold at a discount.
A)True
B)False
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Chapter 15: The Statement of Cash Flows
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Sample Questions
Q1) During 20x5,Oates Company had sales of $500,000,net income of $50,000,average total assets of $700,000,dividend payments of $35,000,net cash flows from operating activities of $90,000,purchases of plant assets of $75,000,and sales of plant assets of $90,000.Free cash flow equals
A)$55,000.
B)$105,000.
C)$40,000.
D)$70,000.
Q2) The statement of cash flows explains the difference between net income as shown on the income statement and the net cash flows generated from operations.
A)True
B)False
Q3) On a statement of cash flows prepared using the indirect method,the amount representing cash paid for interest would
A)be included in the net cash flows from financing activities section.
B)not be shown.
C)be included in the net cash flows from investing activities section.
D)be included in the net cash flows from operating activities section.
Q4) Which accounts are analyzed to determine cash flows from financing activities?
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Chapter 16: Financial Statement Analysis
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Sample Questions
Q1) The ability to pay bills when due and to meet unexpected needs for cash most closely describes
A)cash flow adequacy.
B)long-term solvency.
C)liquidity.
D)profitability.
Q2) Does the existence of conglomerates make financial performance evaluation easier or more difficult? Why?
Q3) The analysis of risk and return is important to both investors and creditors.
A)True
B)False
Q4) The return on assets and the asset turnover ratios are used to analyze A)leverage.
B)long-term solvency.
C)profitability.
D)liquidity.
Q5) Most public companies issue interim financial statements to the public on a quarterly basis.
A)True
B)False
18
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Chapter 17: Managerial Accounting and Cost Concepts
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Sample Questions
Q1) Fixed costs remain constant within a defined range of activity or time period.
A)True
B)False
Q2) Steve,the management accountant of a company,is not familiar with the concept of prudence in financial reporting.Which of the following IMA standards is Steve violating?
A)Confidentiality
B)Materiality
C)Disclosure
D)Competence
Q3) Accountants must have high professional ethics.List and briefly describe five ethical standards that management accountants subscribe to that,in your opinion,help maintain the impression that accountants are highly ethical. The student should list any five of the following ethical standards:
Q4) Which of the following is not a stage in the management process?
A)Evaluating
B)Communicating
C)Planning
D)Recording
Q5) Give two examples of each stage in the management process.
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Chapter 18: Costing Systems: Job Order Costing
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Sample Questions
Q1) Quickwork Company uses a job order costing system.On March 1,Quickwork Company's Work in Process Inventory account shows a beginning balance of $170,000.Production activity for March was as follows: Materials costing $85,000,along with operating supplies of $20,000,were requisitioned into production.Quickwork Company's total payroll was $350,000,of which $75,000 was indirect labor.Overhead is applied at a rate of 125 percent of direct labor cost.Quickwork's Cost of Goods Sold for the month of May was $692,000.Finished Goods Inventory was $71,500 on March 1 and $84,000 on March 31.(Quickwork does not close out overhead accounts until year-end. )
a.Calculate Quickwork's cost of goods completed for March.
b.Calculate Quickwork's work in process ending inventory (March 31).
c.One of the jobs that was started in March,Job 208,was completed in April.Job 208 was 250 special-order decorative lamps.The following costs had been applied to Job 208 as of April 1: direct materials,$1,500;direct labor,$2,000;overhead,$2,500.In April,$580 in direct materials cost and $900 of direct labor cost were added to complete Job 208.What was the cost per unit for Job 208? (Show your computations. )
Q2) An advertising company would probably use a process costing system.
A)True B)False
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Chapter 19: Costing Systems Process Costing
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Sample Questions
Q1) The average costing method matches cost flow with the physical flow of production.
A)True
B)False
Q2) During October,Department A of Answer Inc.started 320,000 units of product in a particular manufacturing process.The beginning work in process inventory was 50,000 units,and the ending inventory was 30,000 units.Direct materials are introduced at the start of processing,and beginning and ending inventories are considered to be 50 percent complete with respect to conversion costs.Department A uses the FIFO costing method. Units transferred out of Department A of Answer during October were
A)335,000.
B)370,000.
C)325,000.
D)340,000.
Q3) Equivalent units for conversion costs of Star Inc.during the month totaled A)7,920.
B)7,680.
C)6,880.
D)5,880.
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Chapter 20: Value-Based Systems: Activity-Based Costing and Lean Accounting
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Q1) Just-in-time operating environments encourage continuous improvement of the work environment.
A)True
B)False
Q2) When using a just-in-time system,what qualities should be a supplier posses?
Q3) The actual amount of time that a product is being worked on is known as the A)moving time.
B)inspection time.
C)processing time.
D)queue time.
Q4) A just-in-time operating environment requires maintenance of large material and finished goods inventories in order to meet customer demand for products.
A)True
B)False
Q5) Activity-based management and lean operations can be used either together or separately to eliminate waste and manage activities.
A)True
B)False
Q6) How do managers measure an activity's performance?
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Chapter 21: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Which of the following is true of the engineering method of separating costs?
A)It is generally used to estimate the cost of activities and new products.
B)It is sometimes called a time and motion study.
C)It separates costs by performing a step-by-step analysis of various elements involved.
D)All of these choices are correct.
Q2) If fixed costs are increased,then a breakeven analysis with an adjustment for profit will yield an increase in targeted sales units.
A)True
B)False
Q3) Practical capacity and engineering capacity are synonymous terms.
A)True
B)False
Q4) Last year,RC Rancho's revenue was $120,000,000,variable costs were $90,000,000 and fixed costs were $15,000,000.RC Rancho's contribution margin ratio was 25 percent.
A)True
B)False
Q5) Explain what cost-volume-profit analysis is and how managers use it.
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Chapter 22: The Budgeting Process
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Q1) Which of the following budgets is prepared before the preparation of production budget?
A)Sales budget
B)Cash budget
C)Direct labor budget
D)Capital expenditure budget
Q2) Sales budget is the final product of the budgeting process.
A)True
B)False
Q3) Budgets identify potential constraints before they become problems.
A)True
B)False
Q4) What is the expected cash payment for direct materials for the month of February of Sombo?
A)$52,000
B)$72,000
C)$89,000
D)$95,000
Q5) Describe three benefits budgeting provides to an organization's success.
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Chapter 23: Flexible Budgets and Performance Analysis
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Q1) The logical linking of goals to measurable objectives and targets,and the tying of appropriate compensation incentives to the achievement of such objectives and targets are critical to the successful coordination of goals.
A)True
B)False
Q2) Write a brief note on the performance-based pay.
Q3) The manager of Center D designs,produces,and sells products to external parties.The manager makes both long-term and short-term decisions regarding resources.What type of responsibility center is Center D?
A)Cost center
B)Profit center
C)Revenue center
D)Investment center
Q4) The alignment of an organization's strategy with all the perspectives of the balanced scorecard results in performance objectives that benefit all stakeholders.
A)True
B)False
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Chapter 24: Standard Costing and Variance Analysis
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Q1) The total overhead cost variance is the difference between what actual overhead cost is and what it should have cost according to the flexible budget for the good units produced.
A)True
B)False
Q2) Using the above information provided for Choco Sweet,compute the direct labor efficiency variance for Choco Sweet.
A)$8,500 (U)
B)$2,500 (F)
C)$11,000 (F)
D)$1,375 (U)
Q3) The static budget can be adjusted automatically for changes in the level of output.
A)True
B)False
Q4) Which of the following is a drawback of using standard costing system?
A)It can be expensive and time-consuming to implement.
B)It distorts actual cost information.
C)It is often inaccurate.
D)It is applicable only to manufacturing businesses,not service businesses.
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Chapter 25: Short-Run Decision Analysis and Capital Budgeting
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Q1) When resources like direct material,labor,or time are scarce,the goal is to maximize the contribution margin per unit of scarce resource.
A)True
B)False
Q2) The purpose of establishing a desired rate of return on investment is to set a point above which the best alternative will be considered acceptable.
A)True
B)False
Q3) Capital investment analysis is also known as capital budgeting.
A)True
B)False
Q4) Which of the following methods uses the time value of money for capital investment analysis?
A)Average investment
B)Net present value method
C)Payback method
D)Accounting rate-of-return method
Q5) Why is the residual value of equipment relevant when considering the replacement of equipment?
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