Introductory Accounting Test Bank
Course Introduction
Introductory Accounting provides students with the fundamental concepts and principles of financial and managerial accounting. The course covers the basics of recording financial transactions, preparing and interpreting financial statements, understanding the accounting cycle, and exploring the role of accounting in business decision-making. Students will gain practical skills in analyzing financial information, understanding assets, liabilities, equity, revenues, and expenses, and applying core accounting procedures in a variety of business contexts.
Recommended Textbook
Fundamental Financial Accounting Concepts 9th Edition by Thomas P Edmonds
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13 Chapters
1874 Verified Questions
1874 Flashcards
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Chapter 1: An Introduction to Accounting
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Jackson Company had a net increase in cash from operating activities of $10,000 and a net decrease in cash from financing activities of $2,000.If the beginning and ending cash balances for the company were $4,000 and $11,000,then net cash change from investing activities was:
A)an outflow or decrease of $1,000.
B)an inflow or increase of $2,000.
C)an inflow or increase of $1,000.
D)zero.
Answer: A
Q2) Retained earnings reduces a company's commitment to use its assets for the benefit of its stockholders.
A)True
B)False
Answer: False
Q3) The value created by a business may be called assets.
A)True
B)False
Answer: False
Q4) What is meant by the term double-entry bookkeeping?
Answer: All transactions affect the accounting equation in at least two places.
Page 3
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Chapter 2: Understanding the Accounting Cycle
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) Indicate whether each of the following statements about the closing process and the accounting cycle is true or false.
_____ a)The closing process transfers certain account balances to retained earnings at the end of the accounting cycle.
_____ b)Only accounts that appear on the income statement are closed at the end of each accounting cycle.
_____ c)Another name for temporary accounts is "nominal accounts."
_____ d)The permanent accounts contain information that is cumulative in nature.
_____ e)The retained earnings balance at the end of any given year is equal to that year's net income.
Answer: a)True b)False c)True d)True e)False
Q2) Which of the following is an asset source transaction?
A)Issued common stock.
B)Paid a cash dividend to stockholders.
C)Received a payment on accounts receivable.
D)Accrued salary expense.
Answer: A
Q3) What is the effect on the accounting equation of a cash payment to creditors?
Answer: Assets decrease;liabilities decrease
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Page 4
Chapter 3: The Double-Entry Accounting System
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157 Verified Questions
157 Flashcards
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Sample Questions
Q1) The T-account format is also called the chart of accounts.
A)True
B)False
Answer: False
Q2) Flannigan Company prepared a trial balance at December 31,2016.A trial balance that balances
A)proves that all transactions have been properly recorded.
B)proves that there are no missing transactions.
C)can only be achieved after adjusting entries have been recorded.
D)proves the equality of debits and credits.
Answer: D
Q3) An increase to the account Dividends would be recorded as a credit;as a result,the account Dividends normally has a credit balance.
A)True
B)False
Answer: False
Q4) Debits decrease asset accounts.
A)True
B)False
Answer: False
Page 5
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Chapter 4: Accounting for Merchandising Businesses
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) A company using the perpetual inventory method paid $250 cash to have goods delivered from one of its suppliers.The payment of $250 for transportation-in is considered:
A)an asset source transaction
B)an asset use transaction
C)an asset exchange transaction
D)a claims exchange transaction
Q2) Which accounts would affect operating income?
A)Account numbers 2,4,and 9.
B)Account numbers 3,5,7,and 9.
C)Account numbers 3,4,7,and 9.
D)Account numbers 3,4,7,8 and 9.
Q3) On June 1,2016,merchandise subject to terms 2/10,n/30 was sold on account to a customer for $26,500.On June 3,the seller issued a credit memorandum for $5,800,accepting merchandise returned by the customer.This was prior to payment by the customer.
a)What is the amount of cash collected by the seller if the payment is made by the customer on June 8,2016?
b)What is the amount of cash collected by the seller if payment is made by the customer on June 21,2016?
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Chapter 5: Accounting for Inventories
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) The accountant for the Bay Company made an error,which understated the ending inventory for 2015 by $7,000.Bay Company uses the periodic inventory system.Assuming that this error is not caught and corrected,indicate the effect of the error on each of the following items.Write U (understated),O (overstated)or N (not affected)next to each item.
a.2016 Beginning Inventory: _________
b.2016 Purchases: __________
c.2015 Goods Available for Sale: ________
d.2015 Net Income: ________
e.2015 Retained Earnings ending balance: __________
f.2015 Total Assets at end of year: ___________
g.2016 Net Income: _________
h.2016 Retained Earnings ending balance: _________
i.2015 Cost of Goods Sold: ___________
j.2015 Gross Margin: _________
Q2) If Bowman Company is using LIFO,how would the accountant compute cost of goods sold when recording a sale under the perpetual inventory system?
Q3) In an inflationary period,which cost flow method,LIFO or FIFO,results in the larger dollar amount of assets on the balance sheet?
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Chapter 6: Internal Control and Accounting for Cash
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) Why would a merchandising company need good internal controls related to its inventory? List three of the key elements of an internal control system that would apply to inventory,and explain how each of them does relate to inventory.
Q2) Which of the following is not a generally recognized internal control procedure?
A)Establishment of clear lines of authority.
B)Having employees covered by a fidelity bond.
C)Requiring regular vacations for certain employees.
D)Customer service comment cards.
Q3) Rexrode Company's bank statement at January 31,2016 showed an ending balance of $24,712.80.The unadjusted cash account balance for Rexrode is $21,245.75.The following data were gathered by Rexrode's accountant:
Outstanding checks as of January 31: $4,895.44
NSF check from customer: $183.62
Debit memo related to the returned deposit: $20.00
Credit memo for interest earned: $12.00
Deposits in transit: $1,236.77
Required: 1)Prepare a bank reconciliation for Rexrode Company at January 31,2016. 2)Prepare the required journal entries for Cash at January 31,2016.
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Chapter 7: Accounting for Receivables
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144 Flashcards
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Sample Questions
Q1) The longer it takes to collect accounts receivable,the greater the opportunity cost incurred.
A)True
B)False
Q2) The year-end adjusting entry to recognize uncollectible accounts expense will
A)decrease assets and decrease equity.
B)increase assets and decrease equity.
C)increase liabilities and increase equity.
D)decrease liabilities and increase equity.
Q3) Accounts receivable turnover is computed by dividing:
A)Sales by Accounts Receivable.
B)Accounts receivable by Sales.
C)Cost of goods sold by Inventory.
D)365 by Accounts Receivable.
Q4) How is the number of days to collect accounts receivable computed? What information does this ratio provide?
Q5) Discuss briefly the costs of making sales on account.
Q6) When is uncollectible accounts expense recognized if the direct write-off method is used?
Q7) Explain the computation of the length of the operating cycle.
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Chapter 8: Accounting for Long-Term Operational Assets
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Sample Questions
Q1) When Company X purchases Company Y,X should record Y's assets at their fair value at the time of the acquisition.
A)True
B)False
Q2) At the end of 2020,assuming the equipment had not been sold,the book value of the office equipment using straight-line depreciation and double-declining balance depreciation,respectively,would be:
A)$12,000/$1,680.
B)$12,000/$12,000.
C)$0/$0.
D)None of these answer choices are correct.
Q3) Generally accepted accounting principles require that,when the estimated useful life of a long-term asset is changed,previously-issued financial statements should not be revised.
A)True
B)False
Q4) The purchase of a new delivery truck for cash is an asset use transaction.
A)True
B)False
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Chapter 9: Accounting for Current Liabilities and Payroll
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) A classified balance sheet is necessary for calculating a company's current ratio.
A)True
B)False
Q2) Employers must withhold unemployment taxes from employee salaries.
A)True
B)False
Q3) Hartford Company borrowed $20,000 on October 1,2016.Hartford issued a one year 6% discount note payable.The adjusting entry necessary to record accrued interest on December 31,2016 would include a:
A)debit to Discount on Notes Payable of $300.
B)debit to Interest Expense for $300.
C)credit to Interest Payable for $300.
D)none of these answer choices are correct.
Q4) Which of the following is a claims exchange transaction?
A)Accrued interest on a note payable.
B)Issued a note to purchase equipment.
C)Repaid principal on a note payable.
D)Paid interest on a note payable.
Q5) When is warranty expense usually recognized?
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Chapter 10: Accounting for Long-Term Debt
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157 Flashcards
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Sample Questions
Q1) Issuing bonds payable when the market interest rate is less than the stated interest rate:
A)results in bonds being issued at a premium.
B)results in bonds being issued at less than their face value.
C)raises the effective interest rate above the stated rate of interest.
D)results in bonds being issued at a premium and the effective interest rate is higher than the stated rate.
Q2) Peak Enterprises issued bonds with a face value of $500,000,receiving cash of $508,000.To record this event,Bonds Payable should be credited for $500,000.
A)True B)False
Q3) The after-tax interest cost of debt equals total interest expense multiplied by the tax rate.
A)True B)False
Q4) When the stated interest rate of a bond is lower than the market interest rate,will the bond sell at a premium or at a discount?
Q5) What is the issue price of $200,000 in bonds that sell at 95.5?
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Chapter 11: Proprietorships,partnerships,and Corporations
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Sample Questions
Q1) Prepare the journal entries needed for the following transactions occurring during 2016 for Valencia,Inc.:
a)On February 1,2016,Valencia purchased for cash,in the open market,4,000 shares of its own common stock at $40 per share.
b)On July 1,2016,1,600 of the shares purchased on February 1,2016 were sold at $38 per share.
c)On September 1,2016,800 of the shares purchased on February 1,2016 were sold at $41 per share.
Q2) The declaration and issuance of a stock dividend will
A)decrease the current ratio
B)have an effect on the current ratio that depends on the market price of the stock at the time the dividend is declared
C)increase the current ratio
D)have no effect on the current ratio
Q3) The number of shares of stock outstanding generally is greater than the number of shares of stock issued.
A)True
B)False
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Chapter 12: Statement of Cash Flows
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129 Flashcards
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Sample Questions
Q1) Which of the following would not be presented in the financing section of the statement of cash flows?
A)Purchased a new office building by issuing a note payable.
B)Purchased treasury stock.
C)Repayment of long-term bonds payable.
D)Issuing of preferred stock.
Q2) On January 1,2016,the balance of Jacobs Corporation's Accounts Receivable was $40,000.Sales on account for 2016 amounted to $320,000 and the ending balance of Accounts Receivable was $64,000.What is the amount of cash collected from customers?
A)$296,000
B)$256,000
C)$344,000
D)$360,000
Q3) Describe where on the Statement of Cash Flows one would find a noncash purchase of equipment.
Q4) What are the two methods used to prepare the operating activities section of the statement of cash flows?
Q5) Prepare the investing activities section of Moreno's statement of cash flows.
Page 14
Q6) Which section of a statement of cash flows resembles an income statement?
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Indicate whether each of the following statements is true or false.
_____ a)Some forms of financial statement analysis involve identifying changes in the same item for the same company over a period of time.
_____ b)Some forms of financial statement analysis involve comparing operations of different companies in the same industry.
_____ c)Vertical analysis is also called trend analysis.
_____ d)Horizontal analysis refers to studying the behavior of individual financial statement items over several periods.
_____ e)Horizontal analysis could be done using changes in the absolute dollar amount of an item or trends in percentages.
Q2) Select the incorrect statement regarding net margin.
A)Net margin refers to the average amount of each sales dollar remaining after all expenses are subtracted.
B)Net margin may be calculated in several ways.
C)The smaller the net margin the better.
D)The amount of net margin is affected by a company's choices of accounting principles.
Q3) Discuss the limitations that affect financial statement analysis.
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Page 15