Introductory Accounting Final Exam
Course Introduction
Introductory Accounting provides students with a foundational understanding of the principles and practices used in the preparation, interpretation, and analysis of financial statements. This course covers essential topics such as the accounting cycle, double-entry bookkeeping, recording business transactions, accruals and deferrals, and the preparation of basic financial statements including the balance sheet, income statement, and cash flow statement. Emphasis is placed on the role of accounting in business decision-making, ethical considerations, and the regulatory environment. By the end of the course, students will have developed the skills necessary to understand and apply accounting concepts in various organizational settings.
Recommended Textbook
Financial Accounting Information for Decisions 6th Edition by John Wild
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Chapter 1: Introducing Accounting in Business
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Sample Questions
Q1) The internal operating functions of businesses include research and development,distribution and human resources.
A)True
B)False
Answer: True
Q2) Creditors' claims on the assets of a company are called:
A)Net losses
B)Expenses
C)Revenues
D)Equity
E)Liabilities
Answer: E
Q3) __________________________ is the recording of transactions or events and is just one part of accounting.
Answer: Recordkeeping (or bookkeeping)
Q4) The statement of cash flows shows the net effect of revenues and expenses for a reporting period.
A)True
B)False
Answer: False
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Chapter 2: Analyzing and Recording Transactions
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Sample Questions
Q1) In which of the following situations would the trial balance not balance?
A)A $1,000 collection of an account receivable was erroneously posted as a debit to Accounts Receivable and a credit to Cash
B)The purchase of office supplies on account for $3,250 was erroneously recorded in the journal as $2,350 debit to Office Supplies and credit to Accounts Payable
C)A $50 cash receipt for the performance of a service was not recorded at all
D)The purchase of office equipment for $1,200 was posted as a debit to Office Supplies and a credit to Cash for $1,200
E)The cash payment of a $750 account payable was posted as a debit to Accounts Payable and a debit to Cash for $750
Answer: E
Q2) Increases in assets are _______________,while increases in liabilities are _______________.
Answer: Debited,credited
Q3) As prepaid expenses are used up,the costs of these assets become expenses.
A)True
B)False
Answer: True
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Chapter 3: Adjusting Accounts and Preparing Financial Statements
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Sample Questions
Q1) A company's Office Supplies account shows a beginning balance of $600 and an ending balance of $400.If office supplies expense for the year is $3,100,what amount of office supplies was purchased during the period?
A)$2,700
B)$2,900
C)$3,300
D)$3,500
E)$3,700
Answer: B
Q2) The Income Summary account is used:
A)To adjust and update asset and liability accounts
B)To close the revenue and expense accounts
C)To determine the appropriate dividend amount
D)In some situations to replace the income statement
E)To replace the retained earnings account in some businesses
Answer: B
Q3) The ________________________________ depreciation method allocates equal amounts of an asset's cost to depreciation during its useful life.
Answer: Straight-line
Page 5
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Chapter 4: Reporting and Analyzing Merchandising Operations
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Sample Questions
Q1) Gross profit is the same as gross margin.
A)True
B)False
Q2) In a perpetual inventory system,the merchandise inventory account reflects the cost of goods available for sale.
A)True
B)False
Q3) A company has sales of $2,530,000,sales discounts of $200,000,sales returns and allowances of $323,000,shipping charges of $115,000,sales commissions of $234,000,net income totaled $863,500,and cost of goods sold of $1,012,000.What is the gross profit/margin ratio?
Q4) Cash sales shorten the operating cycle for a merchandiser; credit purchases lengthen operating cycles.
A)True B)False
Q5) ____________________ refer to merchandise that customers return to the seller after a sale.
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Q6) Describe the recording process (including costs)for purchasing merchandise inventory using a perpetual inventory system.
Chapter 5: Reporting and Analyzing Inventories
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Sample Questions
Q1) The ______________________ method of assigning costs to inventory and cost of goods sold is usually only practical for companies with expensive,customer-made inventory.
Q2) A company had inventory of 5 units at a cost of $20 each on November 1.On November 2,they purchased 10 units at $22 each.On November 6 they purchased 6 units at $25 each.On November 8,they sold 18 units for $54 each.Using the LIFO perpetual inventory method,what was the cost of the 18 units sold?
A)$395
B)$410
C)$450
D)$510
E)$520
Q3) An advantage of the _________________ method of inventory valuation is that it tends to smooth out the effect of erratic changes in costs.
Q4) To avoid the time-consuming process of taking an inventory each year,the majority of companies use the gross profit method to estimate ending inventory.
A)True
B)False
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Chapter 6: Reporting and Analyzing Cash and Internal Controls
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Sample Questions
Q1) Basic bank services such as bank accounts,bank deposits and checking contribute to the control and safeguarding of cash.
A)True
B)False
Q2) Two important limitations of internal control systems are (1)human error or human fraud and (2)cost-benefit.
A)True
B)False
Q3) On a bank reconciliation,an unrecorded debit memorandum for printing checks is:
A)Noted as a memorandum only
B)Added to the book balance of cash
C)Deducted from the book balance of cash
D)Added to the bank balance of cash
E)Deducted from the bank balance of cash
Q4) _________________________ is the electronic transfer of cash from one party to another.
Q5) Describe the banking activities that promote the control of cash and identify the internal control objectives served by the banking activities.
Q6) Discuss the purpose of a bank reconciliation.
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Chapter 7: Reporting and Analyzing Receivables
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Sample Questions
Q1) A company has sales of $350,000 and estimates that 0.5% of its sales are uncollectible.The company's reported amount of bad debts expense is $1,750.
A)True
B)False
Q2) The aging method of determining bad debts expense is based on the knowledge that the longer a receivable is past due,the lower the likelihood of collection.
A)True
B)False
Q3) Tecom had net sales of $315,000 and average accounts receivable of $75,600.Its competitor,ZCom,had net sales of $299,000 and average accounts receivables of $81,350.Calculate the accounts receivable turnover for both companies.Which company is doing a better job of managing its accounts receivables?
Q4) A payee of a note will always honor a note and pay it in full.
A)True
B)False
Q5) The ________________ method of accounting for bad debts records the loss from an uncollectible account receivable at the time it is determined to be uncollectible (and not before).
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Chapter 8: Reporting and Analyzing Long-Term Assets
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Sample Questions
Q1) The formula for calculating total asset turnover is _______________________________________.
Q2) A company purchased equipment valued at $200,000 on January 1.The equipment has an estimated useful life of six years or five million units.The equipment is estimated to have a salvage value of $13,400.Assuming the double declining balance method of depreciation,what is the book value at the end of the second year if 1.5 million units were produced?
A) $166,667.00
B)$88,977.80
C)$96,416.25
D)$168,900.00
E)$137,800.00
Q3) Total asset turnover is calculated by dividing:
A)Gross profit by average total assets
B)Average total assets by gross profit
C)Net sales by average total assets
D)Average total assets by net sales
E)Net assets by total assets
Q4) _______________________ are expenditures that extend an asset's useful life beyond its original estimate.
Page 10
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Chapter 9: Reporting and Analyzing Current Liabilities
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Sample Questions
Q1) Unearned revenue is initially recognized with a:
A)Credit to unearned revenue
B)Credit to revenue
C)Debit to revenue payable
D)Debit to revenue
E)Debit to unearned revenue
Q2) __________ allowances are items that reduce the amount of federal income taxes owed by the individual.
Q3) Times interest earned ratio is computed by dividing _______________ by interest expense.
Q4) When companies pay the government collected sales tax,sales taxes payable is credited and cash is debited.
A)True
B)False
Q5) If Jefferson Company paid a bonus equal to 6.5% of net income after bonuses and the total bonus distributed was $560,000,how much was net income for the year?
Q6) A company had income before interest expense and income taxes of $176,000 and its interest expense is $55,000.Calculate the company's times interest earned ratio.
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Chapter 10: Reporting and Analyzing Long-Term Liabilities
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Sample Questions
Q1) Unsecured bonds are also called ____________________ and are backed by the issuer's general credit standing.
Q2) A company previously issued $2,000,000,10% bonds,receiving a $120,000 premium.On the current year's interest date,after the bond interest was paid and after 40% of the total premium had been amortized,the company purchased the entire bond issue on the open market at 98 and retired it.Prepare the journal entry to record the retirement of these bonds.
Q3) On June 1,a company issued $200,000 of 12% bonds at their par value plus accrued interest.The interest on these bonds is payable semiannually on January 1 and July 1.Prepare the issuer's journal entry to record the bond issuance of June 1.
Q4) A company issued 10-year,9% bonds with a par value of $500,000 when the market rate was 9.5%.The company received $484,087 in cash proceeds.Using the effective interest method,prepare the issuer's general journal entry to record the first semiannual interest payment and the amortization of any bond discount or premium.
Q5) An _______________ is a series of equal payments at equal time intervals.
Q6) _______________ bonds are bonds that mature at more than one date,often in a series and thus are usually repaid over a number of periods.
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Chapter 11: Reporting and Analyzing Equity
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Sample Questions
Q1) A company paid $0.75 in cash dividends per share.It has an earnings per share of $3.50 and a market price per share of $37.50.Its dividend yield equals:
A)11.7%
B)2.0%
C)10.9%
D)21.4% E)46.7%
Q2) _______________________ generally consists of a company's cumulative net income less any net losses and dividends declared since its inception.
Q3) A company issued 60 shares of $100 par value stock for $7,000 cash.The total amount of contributed capital in excess of par is:
A)$100
B)$600
C)$1,000
D)$6,000
E)$7,000
Q4) A stock ____________________ assists with purchases and sales of shares of stock by receiving and issuing certificates as necessary.
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Chapter 12: Reporting and Analyzing Cash Flows
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Sample Questions
Q1) Fabulous Furniture's inventory increased during the year by $6.0 million.Its' accounts payable increased by $4.0 million during the same period.What is the amount of cash Fabulous Furniture paid to suppliers of merchandise during the reporting period if its cost of goods sold was $26.0 million?
Q2) Use the following information to calculate cash paid for wages and salaries: \[\begin{array} { | l | r | }
\hline \text { Salaries expense } & \$ 168,000 \\
\hline \text { Salaries payable, January 1 } & 6,400 \\
\hline \text { Salaries payable, December } 31 & 10,600 \\ \hline \end{array}\]
A)$157,400
B)$163,800
C)$168,000
D)$172,200
E)$174,400
Q3) A company reported average total assets of $496,000 in 2009 and $604,000 in 2010.Its net operating cash flow in 2009 was $41,150 and $55,500 in 2010.Calculate its cash flow on total assets ratio for both years.Comment on the results.
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Chapter 13: Analyzing and Interpreting Financial Statements
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Sample Questions
Q1) Quick assets divided by current liabilities is equal to the:
A)Acid-test ratio
B)Current ratio
C)Working capital ratio
D)Current liability turnover ratio
E)Quick asset turnover ratio
Q2) Industry standards for financial statement analysis:
A)Are based on a company's prior performance
B)Are set by the government
C)Are set by the financial performance and condition of the company's industry
D)Are based on rules of thumb
E)Compare a company's income with the prior year's income
Q3) Dividing ending inventory by cost of goods sold and multiplying the result by 365 is equal to the:
A)Inventory turnover ratio
B)Profit margin
C)Days' sales in inventory
D)Current ratio
E)Total asset turnover
Q4) Explain the form and content of a complete income statement.
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Chapter 14: Investments and International Operations
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Sample Questions
Q1) Foreign exchange rates fluctuate due to many factors including changing political and economic conditions.
A)True
B)False
Q2) A company has net income of $250,000,net sales of $2,000,000 and average total assets of $1,500,000.Its return on total assets is equal to:
A)12.5%
B)13.3%
C)16.7%
D)75.0%
E)600.0%
Q3) Long-term investments can include funds set aside for special purposes such as bond sinking funds.
A)True
B)False
Q4) A company reported net income of $275,000,net sales of $2,500,000 and average total assets of $2,100,000 for the current year.Calculate this company's profit margin,total asset turnover and return on total assets.
Q5) Explain how to record the sale of trading securities.
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Chapter 15: Reporting and Analyzing Partnerships
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Sample Questions
Q1) When a partnership is liquidated,its business is ended.
A)True
B)False
Q2) During 2010,Schmidt invested $75,000 and Baldwin invested $90,000 in a partnership.They agreed that Baldwin would get a salary allowance of $30,000 and they would share any remaining income or loss equally.During 2010 the partnership earned net income of $300,000 and they each withdrew $12,000 from the partnership.Which of the following statements is correct?
A)Schmidt Capital at the end of 2010 is $213,000.
B)Schmidt Capital at the end of 2010 is $210,000.
C)Baldwin Capital at the end of 2010 is $243,000.
D)Baldwin Capital at the end of 2010 is $255,000.
E)Total Capital at the end of 2010 has increased by $300,000.
Q3) Identify and discuss the key characteristics of partnerships.Also,identify non partnership organizations that possess the positive aspects of both partnerships and corporations.
Q4) What are the ways a partner can withdraw from a partnership? Explain how to account for the withdrawal of a current partner from a partnership.
Q5) Explain the steps involved in the liquidation of a partnership.
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Chapter 16: Reporting and Preparing Special Journals
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Sample Questions
Q1) With on-line systems,all information storage should be off-line to protect the data.
A)True
B)False
Q2) Individual transactions in the sales journal are posted regularly to customers' accounts in the ________________________________________.
Q3) A special journal is used to record and post transactions of a similar type.
A)True
B)False
Q4) The Mid-west segment of a domestic company had a segment return on assets of 13%.If the revenues and operating income of this segment were $4 million and $1 million,respectively,what is the segment's average total assets amount?
A)$130,000
B)$52,000
C)$30,769,230
D)$7,692,308
E)$23,076,923
Q5) Explain how the amounts in the subsidiary ledgers are tested for accuracy.
Q6) What is the segment return on assets ratio? What is it used for?
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