Introductory Accounting Solved Exam Questions
Course Introduction
Introductory Accounting provides students with a fundamental understanding of the basic principles and concepts of financial accounting. This course covers essential topics such as the accounting cycle, preparing and analyzing financial statements, recording business transactions, and understanding the role of accounting in decision-making processes. Students will gain practical experience in bookkeeping, the use of accounting software, and interpreting financial information to assess organizational performance. Designed for those new to accounting, this course lays the groundwork for further study and provides valuable skills applicable to any business environment.
Recommended Textbook
Cornerstones of Financial Accounting 1st Canadian Edition by Jay Rich
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12 Chapters
2327 Verified Questions
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Page 2
Chapter 1: Accounting and the Financial Statements
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Sample Questions
Q1) Refer to Baloon-E-Tunes.Prepare the current liabilities section of the balance sheet at December 31.You may omit the heading.If the amount of current liabilities were larger,what effect would this have on the current ratio?
Answer: \[\begin{array} { l r }
\text { Accounts payable } & \$ 360,000 \\
\text { Salaries payable } & 10,000 \\
\text { Income taxes payable } & \underline{240,000 }\\
\text { Total } & \underline{\$ 610,000}
\end{array}\] When current liabilities increase,the denominator of the current ratio increases.This causes the current ratio itself to decrease.
Q2) Income from operations includes interest revenue and interest expense because these items are considered to be operating in nature.
A)True
B)False
Answer: False
Q3) Current assets minus current liabilities is called ____________________. Answer: working capital
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Chapter 2: The Accounting Information System
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Sample Questions
Q1) Two friends launch a new business by investing $25,000 each.They are given shares as evidence of their ownership interest.What effect does this transaction have on the accounting equation?
A) Assets and liabilities increase.
B) Assets and contributed capital increase.
C) Liabilities increase and retained earnings decrease.
D) Assets and liabilities decrease.
Answer: B
Q2) Which of the following will NOT cause a trial balance to be out of balance?
A) The balance for the account is incorrectly computed.
B) A debit entry is posted as a credit.
C) A credit entry is posted to the wrong account, but still as a credit.
D) An account is accidentally omitted from the trial balance.
Answer: C
Q3) Information is _____________ if it adds either predictive or confirmatory value. Answer: relevance relevant
Q4) The ____________________ is a list of all the accounts used by an entity. Answer: chart of accounts
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Chapter 3: Accrual Accounting
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Sample Questions
Q1) Which of the following is a characteristic of the worksheet?
A) Worksheets do not facilitate the preparation of financial statements.
B) The income summary account is used to determine net income for the period.
C) Only one trial balance appears on the worksheet.
D) The income statement section precedes the retained earnings statement section.
Answer: D
Q2) Based on its income for the month,a company estimates that it will owe $23,000 of federal income taxes for May.What is the effect of the adjustment on the financial statements?
A) increase shareholders' equity
B) increase income taxes expense
C) increase retained earnings
D) decrease income taxes payable
Answer: B
Q3) Refer to California Condos.The company reported interest receivable of $2,500 at December 31,Year 1,and $0 at the beginning of 2013.How much cash did the company collect for interest during the year?
Answer: $7,500
$10,000 (Interest Revenue)- $2,500 (Interest Receivable at December 31)= $7,500
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Page 5
Chapter 2: Internal Control and Cash
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Sample Questions
Q1) For which of the following is the control activity "segregation of duties" most effective?
A) increasing cost of sales
B) preventing collusion
C) helping employees assess risk
D) safeguarding assets
Q2) Cash equivalents typically appear in the long-term investments section of a balance sheet.
A)True
B)False
Q3) Who are responsible for monitoring activities within the internal control system?
A) external auditors and managers
B) internal auditors and board of directors
C) the board of directors and managers
D) chair of the board and managers
Q4) An effective system of internal control is critical to protecting a company's investment in cash.Identify the five control activities and provide one example that relates to each control as it would be applied to cash.
Q5) Why is cash management necessary?
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Chapter 5: Revenue and Receivables
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Sample Questions
Q1) indicates that the earnings process is substantially complete
A)accounts receivable
B)aging method
C)allowance for doubtful accounts
D)earned
E)notes receivable
F)realized
G)securitization
Q2) Refer to the figure Ace Computing Company.What will be the net realizable value of receivables appearing on the Year 1 balance sheet?
A) $39,648
B) $39,800
C) $40,648
D) $41,300
Q3) used to induce the customer to keep damaged goods
A)sales discount
B)trade discount
C)sales allowance
D)sales returns
Q4) What is the purpose of an aging schedule for accounts receivable?
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Chapter 6: Cost of Goods Sold and Inventory
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Sample Questions
Q1) A LIFO reserve represents the amount by which cost of goods sold on a FIFO basis exceeds the cost of goods sold on a LIFO basis for the current year.
A)True
B)False
Q2) Refer to the information provided in the figure Regan Company.What would be the effects of the inventory errors for Year 1?
A) Assets and shareholders' equity will be overstated by $5,000 on the balance sheet; expenses and net income will be understated by $5,000 on the income statement.
B) Assets and shareholders' equity will be overstated by $5,000 on the balance sheet, and expenses will be overstated by $5,000 on the income statement; thus, net income will be understated by $5,000.
C) Assets and shareholders' equity will be understated by $5,000 on the balance sheet, and expenses will be overstated by $5,000 on the income statement; thus, net income will be understated by $5,000.
D) Assets and shareholders' equity will be overstated by $5,000 on the balance sheet, and expenses will be understated by $5,000 on the income statement; thus, net income will be overstated by $5,000.
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Page 8
Chapter 7: Property plant and Equipment Intangibles and Natural Resources
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Sample Questions
Q1) Below are several accounts and balances from the Year 1 financial statements for Fripp,Inc.Prepare the intangible asset section of the company's balance sheet,as well as a partial income statement in the space provided below using the accounts provided.
\[\begin{array} { l r }
\text { Amortization expense } & 22,000 \\
\text { Amortization since inception } & 88,000 \\
\text { Loss an sale of trademark } & 31,000 \\
\text { Patents } & 270,200 \\
\text { Land } & 180,000 \\
\text { Goodwril } & 250,000 \\
\text { Research and development costs } & 320,000
\end{array}\]
\[\begin{array} { | l | l | }
\hline \text { Balance sheet } & \text { Income Statement } \\
\hline & \\ & \\ & \\
\hline
\end{array}\]
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Chapter 8: Current Liabilities
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Sample Questions
Q1) CPP taxes
A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability
Q2) On August 1,Year 1,Genuine Services accepted a $6,000 advance payment from a customer for services to be provided in the future.The contract requires the company to review operations at each of the customer's six locations over the next 6 months.What is the impact on the accounting equation of recording this transaction on August 1?
A) Assets and liabilities increase.
B) Assets and liabilities decrease.
C) Liabilities decrease and shareholders' equity increases.
D) Liabilities increase and shareholders' equity decreases.
Q3) Why are unearned revenues considered current liabilities?
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Page 10
Chapter 9: Long-Term Liabilities
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Sample Questions
Q1) A company issued five-year bonds with a par value of $5,000,000 and a 7% annual stated rate of interest on January 2,Year 1.The issue price of the bond issue was $4,431,850,which reflected a 10% effective interest rate.Interest payments are made annually.Any premiums or discounts should be amortized using the effective interest rate method.
Required:
A) Record the issuance of the bonds.
B) Record interest expense at December 31, Year 1.
C) Record the interest paid to the bondholders on January 2, Year 2.
D) Record interest expense at December 31, Year 2.
Q2) If bonds were initially issued at a discount,what will happen to the carrying value of the bonds on the issuer's books?
A) decrease as the bonds approach their maturity date
B) increase as the bonds approach their maturity date
C) remain constant throughout the bonds' life
D) fluctuate throughout the bonds' life
Q3) The contract rate is also called the coupon or stated rate.
A)True
B)False
Q4) Obligations that extend beyond one year are referred to as ____________________.
11
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) Refer to the figure Company N.The indirect method is used to prepare the operating activities section of the statement of cash flows.What amount will be reported as net cash inflow from operating activities for Year 2?
A) $92,000
B) $109,000
C) $111,000
D) $113,000
Q2) Free cash flow is equal to net cash flow from operating activities minus capital expenditures and dividends.
A)True
B)False
Q3) Refer to the figure Metz Vets.Which of the following activities results in a cash outflow?
A) decreases in noncash current assets (NCCA)
B) decreases in long-term assets (LTA)
C) increases in long-term liabilities (LTL)
D) decreases in retained earnings (RE)
Q4) Refer to Maritime Marine Services.What was the amount paid to retire long-term debt during Year 2?
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Chapter 12: Investments
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Sample Questions
Q1) Business combinations can occur through either an asset or ____________________ acquisition.
Q2) situation where the investor owns 20-50%of the outstanding common shares of the investee and is therefore assumed to possess significant influence over the operating and financial policies of the investee
A)equity security
B)debt security
C)passive
D)significant influence
E)control
F)parent
G)subsidiary
H)goodwill
I)business combination
J)minority interest
K)fair value method
L)unrealized gains and losses
M)equity method
N)consolidation worksheet
Q3) ____________________ investments can be classified as debt or equity.
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) In which of the following ways does the quick ratio differ from the current ratio?
A) The quick ratio represents the amount of cash on hand instead of the total current assets.
B) The quick ratio excludes inventories and accounts receivable from the numerator of the fraction.
C) The quick ratio more strictly measures a company's ability to pay its current obligations.
D) The quick ratio signals the need to liquidate short-term investments when it drops below 2.0.
Q2) Which of the following ratios is used to analyze a company's asset efficiency?
A) return on assets
B) inventory turnover ratio
C) earnings per share
D) debt-to-total-assets ratio
Q3) Refer to the figure Randstad Inc.What is the dividend yield ratio for Year 2?
A) 1.6%
B) 1.8%
C) 2.6%
D) 3.0%
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