Principles of Accounting Exam Questions
Course Introduction
Principles of Accounting introduces students to the foundational knowledge and skills necessary to understand and apply basic accounting concepts. The course covers the accounting cycle, including journal entries, ledgers, trial balances, and the preparation of essential financial statements such as the income statement, balance sheet, and cash flow statement. Students will learn about the roles and responsibilities of accountants, the ethical considerations in the profession, and how accounting information supports business decision-making. Emphasis is placed on understanding the framework of generally accepted accounting principles (GAAP) and interpreting financial data to assess an organization's performance and financial position.
Recommended Textbook
Survey of Accounting 6th Edition by Carl S. Warren
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15 Chapters
1713 Verified Questions
1713 Flashcards
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Chapter 1: The Role of Accounting in Business
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Sample Questions
Q1) A corporation is a business that is legally separate and distinct from its owners.
A)True
B)False
Answer: True
Q2) A liability is a legal obligation to repay the amount borrowed according to the terms of the borrowing agreement.
A)True
B)False
Answer: True
Q3) A summary of revenue and expenses for a specific period of time is a(n):
A) income statement.
B) balance sheet.
C) statement of cash flows.
D) retained earnings statement.
Answer: A
Q4) The balance sheet represents the accounting equation.
A)True
B)False
Answer: True
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Chapter 2: Basic Accounting Concepts
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Sample Questions
Q1) Stockholders' Equity will be increased by all of the following accounts except:
A) dividends
B) revenues
C) owners' investments
D) all of the above increase Stockholders' Equity.
Answer: A
Q2) Hodges, Inc. had the following assets and liabilities as of September 30, 2013:
\[\begin{array} { l l }
566,327 & \text { Asset } \\ 528,416 & \text { Iiabilities } \end{array}\] What is the stockholders' equity of Hodges as of September 30, 2013?
A) $0
B) $27,911
C) $84,743
D) Cannot be determined with this information
Answer: B
Q3) How can a company earn a large net income and have a small balance in retained earnings?
Answer: The company may pay out most of its earnings in dividends.
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Page 4
Chapter 3: Accrual Accounting Concepts
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111 Flashcards
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Sample Questions
Q1) The _____ is prepared with various sections, subsections, and captions that aid in its interpretation and analysis.
A) accounting equation
B) retained earnings statement
C) intangible asset section
D) classified balance sheet
Answer: D
Q2) Accrued expenses are expenses that have been incurred and paid.
A)True
B)False
Answer: False
Q3) Under the cash basis of accounting, expenses are recorded when paid.
A)True
B)False
Answer: True
Q4) The fixed asset section of a balance sheet may also be labeled as property, plant, and equipment.
A)True
B)False
Answer: True
Page 5
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Chapter 4: Accounting for Merchandising Businesses
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138 Flashcards
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Sample Questions
Q1) The credit terms of a sale are normally indicated on a(n):
A) purchase order.
B) invoice.
C) bill of lading.
D) check.
Q2) In a multiple-step income statement, sales will be reduced by sales discounts and sales returns and allowances to arrive at net sales.
A)True
B)False
Q3) On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.
A)True
B)False
Q4) Purchases of merchandise increase the merchandise inventory account under the perpetual inventory system.
A)True
B)False
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Chapter 5: Sarbanes-Oxley, Internal Control, and Cash
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) The data needed to adjust a depositor's books are shown in the "adjustments to the depositor's records" section of a bank reconciliation.
A)True
B)False
Q2) Describe the features of a voucher system and list typical supporting documents for a voucher.
Q3) Separating the custody of assets from accounting for assets is a part of which element of internal control?
A) Information and communication
B) Monitoring
C) Control environment
D) Control procedures
Q4) When the petty cash fund is replenished, the petty cash account is adjusted for the total of all expenditures made since the fund was last replenished.
A)True
B)False
Q5) What is the purpose of the Sarbanes-Oxley Act of 2002, and why was it enacted?
Q6) What is a special-purpose cash fund? What is its purpose? Give two examples.
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Chapter 6: Receivables and Inventories
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Sample Questions
Q1) The process of a company selling its accounts receivable to another company is referred as:
A) discounting.
B) adjusting.
C) assignment.
D) factoring.
Q2) A written promise to pay a sum of money on demand or at a definite time is called a(n):
A) letter of credit.
B) deferred note.
C) credit memorandum.
D) promissory note.
Q3) The presentation of net accounts receivable on the balance sheet will be most accurate under the
A) direct write-off method.
B) cash basis accounting.
C) estimate based on analysis of receivables.
D) none of these.
Q4) Other than accounts receivable and notes receivable, name other receivables that might be included on the balance sheet.
Page 8
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Chapter 7: Fixed Assets and Intangible Assets
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Sample Questions
Q1) If a company sells a fixed asset for an amount which is less than its book value, a gain must be recognized.
A)True
B)False
Q2) Cook Co. incurred the following costs related to the office building used in operating its sports supply company:
(a)Replaced a broken window.
(b)Replaced the rof that had been on the building for 23 years.
(c)Serviced all the air conclitioners before summer started.
(d)Replaced the air conditionerswith refrigerated air conditioners in the customer service areas.
(e)Added a warehouse to the back of the building.
(f)Repainted the interior walls.
(g)Installed window shutters on all windows.
Classify each of the costs as a capital expenditure or a revenue expenditure.
Q3) The difference between a fixed asset's initial cost and its current market value is called the asset's depreciable cost.
A)True
B)False
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Page 9
Chapter 8: Liabilities and Stockholders Equity
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131 Flashcards
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Sample Questions
Q1) When the contract rate of interest on bonds is higher than the market rate of interest, the bonds sell at:
A) a premium.
B) their face value.
C) their maturity value.
D) a discount.
Q2) The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is termed a:
A) stock dividend.
B) stock split.
C) stock option.
D) preferred dividend.
Q3) The declaration of a cash dividend decreases a corporation's stockholders' equity and decreases its assets.
A)True
B)False
Q4) The main source of paid-in capital is from issuing stock.
A)True
B)False
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Chapter 9: Financial Statement Analysis
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Sample Questions
Q1) Sarbanes-Oxley Act of 2002 requires which of the following report to be prepared by the management of the company?
A) A report evaluating the probability that the company will remain in business.
B) A report showing management's assessment of internal control.
C) A report assessing the market value of the company's current stock price.
D) A report identifying the competency of the company's board of directors.
Q2) Based on the following data for the current year, determine the accounts receivable turnover? \(\begin{array}{ll}
\$ 500,000 & \text { Net sales on account during the year } \\
300,000 & \text { Cost of merchandise sold during the yeat } \\
45,000 & \text { Accounts receivable, be ginning of year } \\
35,000 & \text { Accounts receivable, end of year } \\
90,000 & \text { Inventory, be ginning of year } \\
110,000 & \text { Inventory, end of year } \end{array}\)
A) 12.5
B) 14.3
C) 11.1
D) 7.5
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Chapter 10: Accounting Systems for Manufacturing Businesses
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Sample Questions
Q1) The Harold Company forecasts that total overhead for the current year will be $12,000,000 and total machine hours will be 200,000 hours. However, the actual overhead is $4,000,000 and the actual machine hours are 100,000 hours. If the company uses a predetermined overhead rate based on machine hours for applying overhead, the overhead will be:
A) overapplied by $2,000,000.
B) underapplied by $2,000,000.
C) overapplied by $4,000,000.
D) underapplied by $4,000,000.
Q2) Hudson, Inc. has estimated total factory overhead costs of $400,000, and 20,000 direct labor hours for the current fiscal year. If the direct labor hours for Job N41 is 1,500, calculate the total factory overhead applied to this job.
A) $40,000
B) $20,000
C) $3,000
D) $30,000
Q3) Indirect labor is included in factory overhead.
A)True
B)False
Page 12
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Chapter 11: Cost Behavior and Cost-Volume-Profit Analysis
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140 Flashcards
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Sample Questions
Q1) A change in fixed costs as a result of increase in the property tax rates will increase the break-even point.
A)True
B)False
Q2) If fixed costs are $600,000 and the unit contribution margin is $12, what amount of units must be sold in order to realize an operating income of $100,000?
A) 33,334 units
B) 58,334 units
C) 41,667 units
D) 50,000 units
Q3) Break-even analysis is a type of cost-volume-profit analysis.
A)True
B)False
Q4) A low operating leverage is normal for highly automated industries.
A)True B)False
Q5) Variable cost per unit remains the same regardless of activity level. A)True B)False
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Chapter 12: Differential Analysis and Product Pricing
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Sample Questions
Q1) Defense contractors would be more likely to use which of the following cost concepts in pricing their product?
A) Variable cost
B) Product cost
C) Total cost
D) Fixed cost
Q2) The revenue that is forgone from an alternative use of an asset, such as cash, is called an opportunity cost.
A)True
B)False
Q3) In attempting to improve profitability when faced with a bottleneck related to hours that is involved in the production of two or more products, which of the following is most important for management to consider?
A) Contribution margin per unit for each product
B) Time required for each different product passing through the bottleneck
C) Selling price or sales revenue generated by each product produced through the bottleneck
D) Contribution margin per bottleneck hour for each product
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Chapter 13: Budgeting and Standard Cost Systems
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Sample Questions
Q1) Budgetary slack can be avoided if lower and mid-level managers are requested to support all of their spending requirements with specific operational plans.
A)True
B)False
Q2) Once a static budget has been determined, it is changed regularly as the underlying activity changes.
A)True
B)False
Q3) When budget goals are set too tight, the budget becomes less effective for planning and controlling operations.
A)True
B)False
Q4) Incurring actual indirect factory wages in excess of budgeted amounts for actual production results in a:
A) unfavorable quantity variance.
B) unfavorable controllable variance.
C) favorable volume variance.
D) favorable labor rate variance.
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Chapter 14: Performance Evaluation for Decentralized Operations
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Sample Questions
Q1) The objective of transfer pricing is to encourage each division's manager to transfer goods and services in such a manner that will increase the overall company income.
A)True
B)False
Q2) Service department charges are similar to the expenses that would be incurred if the profit center purchased the services from outside the company.
A)True
B)False
Q3) Separation of businesses into more manageable operating units is termed centralization.
A)True
B)False
Q4) If income from operations for a division is $120,000, sales are $975,000, and invested assets are $750,000, the investment turnover would be 6.3.
A)True
B)False
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Chapter 15: Capital Investment Analysis
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Sample Questions
Q1) When evaluating two competing proposals with unequal lives, management should give greater consideration to the investment with the longer life because the asset will be useful to the company for a longer period of time.
A)True
B)False
Q2) A $350,000 capital investment proposal has an estimated life of four years and no residual value. The estimated net cash flows are as follows: \(\begin{array}{lll}
\text { Year }&\text { Net Cash flow }&\text { Year }&\text { Net Cash Flow }\\
1&\$150,000&3&\$104,000\\ 2&130,000&4&90,000
\end{array}\) The minimum desired rate of return for net present value analysis is 12%. The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636, respectively. Determine the net present value.
Q3) A qualitative characteristic that influences capital investment analysis is manufacturing productivity.
A)True
B)False
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