Principles of Accounting I Final Exam Questions
Course Introduction
Principles of Accounting I introduces students to the fundamental concepts and procedures of financial accounting. The course covers the accounting cycle, including recording, classifying, and summarizing business transactions, preparing financial statements, and understanding the components of assets, liabilities, and owners' equity.
Emphasis is placed on the analysis and interpretation of financial statements, the double-entry system, and the application of generally accepted accounting principles (GAAP). This foundational course prepares students for advanced study in accounting and equips them with essential skills for business decision-making.
Recommended Textbook
Financial Accounting 10th Edition by Walter T. Harrison
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Page 2
Chapter 1: The Financial Statements
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Sample Questions
Q1) All of the following line items are found on the Statement of Cash Flows EXCEPT for:
A)net cash used by investing activities.
B)net cash provided by operating activities.
C)net cash used by financing activities.
D)total stockholders' equity.
Answer: D
Q2) The CEO of Clarkson Company owns a vacation home in Hawaii.Clarkson Company owns a factory in Detroit where they are headquartered.Which of these properties is considered an asset(s)of the business?
A)Only the vacation home in Hawaii
B)Only the factory in Detroit
C)Both the vacation home in Hawaii and the factory in Detroit
D)Neither the vacation home in Hawaii nor the factory in Detroit
Answer: B
Q3) Revenues are cash distributions to the stockholders.
A)True
B)False
Answer: False
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Chapter 2: Transaction Analysis
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Sample Questions
Q1) A company recorded a cash payment incorrectly.They debited Accounts Receivable for $1,000 and credited Cash for $1,000.The correct entry would debit Accounts Payable for $1,000 and credit Cash for $1,000.Is the trial balance out of balance?
A)No.
B)Yes,by $1,000.
C)Yes,by $2,000.
D)Yes,by an indeterminate amount.
Answer: A
Q2) A transaction that includes a debit to an expense and a credit to a liability indicates that:
A)revenues increased.
B)expenses decreased.
C)liabilities increased.
D)cash decreased.
Answer: C
Q3) Each journal entry should contain a brief description of the transaction.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Accrual Accounting Income
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Sample Questions
Q1) The revenue principle requires that a business record revenue when the business:
A)receives an order from a customer.
B)prepares the invoice for the customer.
C)delivers goods or services to a customer.
D)receives payment from a customer.
Answer: C
Q2) A company has current assets of $80,000,long-term assets of $150,000,current liabilities of $40,000,and long-term liabilities of $40,000.The current ratio is: A).80.
B)1.33.
C)2.00.
D)2.33.
Answer: C
Q3) A Trial Balance Worksheet can be used to prepare:
A)balance sheet.
B)income statement.
C)statement of retained earnings.
D)all of the above.
Answer: D
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Page 5
Chapter 4: Internal Control Cash
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Sample Questions
Q1) A receiving report informs a vendor of the amount of goods received by the purchaser.
A)True
B)False
Q2) In a bank reconciliation,items recorded by the bank,but not yet recorded by the company,include:
A)deposits in transit.
B)bank collections of accounts receivable.
C)outstanding checks.
D)both deposits in transit and outstanding checks.
Q3) One of the most common types of fraud that impacts the financial statements is the misappropriation of assets.
A)True
B)False
Q4) Which is NOT an objective of an internal control system?
A)Safeguarding of assets
B)Compliance with company policies
C)Compliance with legal requirements
D)Risk assessment
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Chapter 5: Short-Term Investments Receivables
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Sample Questions
Q1) The maker of a note records interest expense.
A)True
B)False
Q2) There are two parties to a note and:
A)the creditor has a note receivable and the debtor has a note payable.
B)the creditor has a note payable and the debtor has a note receivable.
C)the creditor and debtor both have notes receivable.
D)the creditor and debtor both have notes payable.
Q3) By selling on credit,companies run the risk of not collecting some receivables.
A)True
B)False
Q4) Investments in trading securities:
A)are reported after accounts receivable on the balance sheet.
B)are more liquid than cash.
C)are reported at historical cost on the balance sheet.
D)are reported at fair value on the balance sheet.
Q5) The quick ratio helps to measure a company's liquidity.
A)True
B)False
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Chapter 6: Inventory Cost of Goods Sold
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Sample Questions
Q1) Boston Company sells twenty items for $1,000 per unit,and has a cost of goods sold percentage of 70%.The gross profit to be reported for selling 20 items is:
A)$300.
B)$6,000.
C)$14,000.
D)$20,000.
Q2) IFRS defines market value for inventory as net realizable value.
A)True
B)False
Q3) Which statement is TRUE?
A)Most companies use the perpetual inventory system.
B)Most companies use the periodic inventory system.
C)Most companies use the specific identification method.
D)Most companies in the United States follow International Financial Reporting Standards.
Q4) An error in ending inventory creates errors for two accounting periods.
A)True
B)False
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Chapter 7: Plant Assets,natural Resources, Intangibles
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Sample Questions
Q1) All of the following are needed to measure depreciation,EXCEPT for: A)cost.
B)market value.
C)estimated useful life.
D)estimated residual value.
Q2) Costs that do not extend a plant asset's capacity or its useful life,but merely maintain the asset or restore it to working order are recorded as:
A)capital expenditures.
B)expenses.
C)extraordinary repairs.
D)modification of assets.
Q3) On January 2,2013,Saminski,Inc.,acquired equipment for $200,000.The estimated life of the equipment is 5 years.The estimated residual value is $30,000.What is the Accumulated Depreciation of the equipment on December 31,2014,if Saminski uses the double-declining-balance method of depreciation?
A)$68,000
B)$80,000
C)$108,800
D)$128,000
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Page 9
Chapter 8: Long-Term Investments: The Time Value of Money
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Sample Questions
Q1) The Allowance to Adjust Investment in Available-for-Sale Securities to Market account has a current credit balance of $1,000 after the adjustment at year-end.Available-for-sale investments have a fair value of $20,000.The original cost of the investments was $21,000.The carrying value of the investments is:
A)$18,000.
B)$19,000.
C)$20,000.
D)$21,000.
Q2) Under the equity method,the Equity-Method Investment account is debited when the:
A)investee reports net income.
B)investee reports net loss.
C)investor receives a cash dividend.
D)investment is sold.
Q3) A U.S.company sells goods on account to a French company.The French company will pay in euros.If the euro strengthens before the U.S.company collects,the U.S.company will have a foreign-currency transaction gain.
A)True
B)False
Page 10
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Chapter 9: Liabilities
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Sample Questions
Q1) Bonds that mature on a single date are called ________.Bonds that mature on multiple dates are called ________.
A)mortgage bonds; serial bonds
B)serial bonds; mortgage bonds
C)debentures; special bonds
D)term bonds; serial bonds
Q2) Solderman Company issued $500,000,6%,10-year bonds for $432,800 with a market rate of 8%.The effective-interest method of amortization is to be used and interest is paid annually.The journal entry on the first interest payment date would include a:
A)credit to Interest Expense of $30,000.
B)credit to Cash of $34,624.
C)credit to Discount on Bonds Payable of $4,624.
D)credit to Interest Expense of $4,624.
Q3) If bonds are issued at a discount,the issuing corporation will pay an amount greater than the face amount of the bonds on the maturity date.
A)True
B)False
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) To record a 10% stock dividend,accountants use ________.To record a 40% stock dividend,accountants use ________.
A)market price per share; market price per share
B)par value per share; par value per share
C)par value per share; market price per share
D)market price per share; par value per share
Q2) The number of shares of authorized stock of a corporation:
A)changes every time stock is sold.
B)is stated in the charter.
C)has no limit.
D)must be recorded as a journal entry.
Q3) The purchase of treasury stock has the same effect on stockholders' equity as issuing stock.
A)True
B)False
Q4) A stock dividend is considered small when it is a dividend of:
A)less than 30% but greater than 25% of the corporation's outstanding stock.
B)between 50% and 100% of the corporation's outstanding stock.
C)more than 30% of the corporation's outstanding stock.
D)25% or less of the corporation's outstanding stock.
Page 12
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Chapter
11: Evaluating Performance: Earnings Quality, the Income Statement, the Statement of Comprehensive Income
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Sample Questions
Q1) When a U.S.-based company has a payable denominated in a foreign currency,the U.S.company wants the foreign currency to ________ and the U.S.dollar to
A)strengthen; strengthen B)strengthen; weaken C)weaken; strengthen D)weaken; weaken
Q2) On August 1,Steffen Computers,Inc.purchased thirty computer chips,on account,from a company located in Taiwan for 500,000 Taiwan dollars.On that date the Taiwan dollar is worth $0.040.On September 1,when the Taiwan dollar was worth $0.038,payment was made.The journal entry on September 1 by Steffen Computers,Inc.would include a:
A)debit to Accounts Payable $19,000.
B)debit to Foreign-Currency Transaction Loss $1,000. C)credit to Foreign-Currency Transaction Gain $1,000. D)credit to Cash $20,000.
Q3) It is management's responsibility to issue a report on internal control. A)True B)False
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Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) An example of a cash equivalent is a money-market account.
A)True
B)False
Q2) Using the indirect method to calculate net cash provided by operating activities,a decrease in prepaid expenses is:
A)subtracted from net income.
B)added to net income.
C)ignored since it does not affect expenses.
D)ignored since it does not affect net income.
Q3) In computing Net Cash Provided by Operating Activities using the indirect method,each of the following is added to net income EXCEPT:
A)an increase in accrued expenses payable.
B)a gain on sale of equipment.
C)depreciation expense.
D)a decrease in inventory.
Q4) A statement of cash flows reports the cash inflows and cash outflows for a company at a point in time.
A)True
B)False
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) The leverage ratio measures:
A)the impact of equity financing on a company's profitability.
B)the impact of debt financing on a company's profitability.
C)the impact of leverage on a company's financial position.
D)the impact of equity financing on a company's financial position.
Q2) On a statement of cash flows(indirect method),which line item is NOT reported as an operating activity?
A)Depreciation expense
B)Net income
C)Increase in inventory
D)Repayment of long-term debt
Q3) Cash,short-term investments and net current receivables are all components of the numerator of the acid-test ratio.
A)True
B)False
Q4) On a common-size balance sheet,each line item is expressed as a percentage of:
A)current assets.
B)operating income.
C)total assets.
D)net income.
15
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