Principles of Accounting I Practice Questions
Course Introduction
Principles of Accounting I introduces students to the fundamental concepts and techniques of financial accounting. The course covers the accounting cycle, including the recording, classification, and summarization of financial transactions, as well as the preparation and interpretation of basic financial statements. Topics include the role of accounting in business decision-making, the use of accounting information by various stakeholders, and the ethical standards governing the profession. Emphasis is placed on understanding assets, liabilities, equity, revenues, and expenses, as well as developing the analytical skills necessary to evaluate financial data.
Recommended Textbook
Accounting 9th Canadian Edition Volume I by Charles T. Horngren
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Page 2
Chapter 1: Accounting and the Business Environment
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Sample Questions
Q1) On Jan.1,2012,William Kelly started Kelly's Computer Service by investing $10,000.On Jan.3,the business borrowed $10,000 from a creditor and executed a Note payable with the principal and interest to be due in one year.On Jan.5,the business purchased $12,000 of equipment for cash.On Jan.8,Kelly's rendered service to his first corporate client and earned $2,500 in cash.On Jan.12,Kelly's incurred repair expense of $1,200 and promised to pay the repair contractor the following month.On Jan.18,Kelly's rendered service to a new client in the amount of $6,000 "on account," (the client promised to pay the following month).At the end of January,Kelly took a withdrawal of $1,000.Please prepare an income statement for the month of January,a statement of owner's equity for the month of January,and a balance sheet at Jan.31,2012.
Answer: 11ea7fc9_8bf7_5e91_a6e9_67a6c813a060_TB2653_00
Ratinal: This question is not available in MyAccountingLab.
Q2) The faithful representation principle requires that information is complete,neutral and free from material error.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Recording Business Transactions
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Sample Questions
Q1) A business purchases equipment by paying cash of $8,000 and issuing a note payable of $12,000.Which of the following occurs?
A) Cash is credited for $8,000; Equipment is credited for $20,000; and Notes payable is debited for $12,000.
B) Cash is credited for $8,000; Equipment is debited for $20,000; and Notes payable is credited for $12,000.
C) Cash is debited for $8,000; Equipment is debited for $12,000; and Notes payable is credited for $20,000.
D) Cash is credited for $8,000; Equipment is credited for $12,000; and Notes payable is debited for $4,000.
Answer: B
Q2) For Drawing,the category of account and its normal balance are:
A) Owner's equity and a credit balance.
B) Owner's equity and a debit balance.
C) Liabilities and a credit balance.
D) Assets and a credit balance.
Answer: B
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Page 4
Chapter 3: The Adjusting Process
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Sample Questions
Q1) On December 31,2012,the adjusting entry for depreciation was made incorrectly.The following entry was made erroneously: \[\begin{array} { | l | r | r | }
\hline \text { Depreciation expense } & 1,500 & \\
\hline \text { Accumulated depreciation } & & 1,500 \\
\hline
\end{array}\] The correct amount of depreciation should have been $5,100.Consider the effects of this error on the income statement,and identify which of the following statements is TRUE.
A) Net income is overstated by $3,600.
B) Net income is understated by $3,600.
C) Net income is understated y $1,500.
D) Net income is not affected by this error.
Answer: A
Q2) Accrual accounting records transactions ONLY when cash is received or paid.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Beginning balance in Capital is $80,000.Revenues are $60,000.Expenses are $75,000.No withdrawals were taken.The ending balance in Capital is $65,000.
A)True
B)False
Q2) Which of the following does the current ratio measure?
A) The company's overall ability to pay liabilities
B) The company's ability to pay current liabilities with current assets
C) The proportion of the company's assets that are financed with debt
D) The company's rate of cash flow
Q3) Capital is a permanent account.
A)True
B)False
Q4) Which of the following is TRUE if the income statement debit column exceeds the income statement credit column on a worksheet?
A) The company has a net loss.
B) The capital account increased during the period.
C) The company has net income.
D) Liabilities are greater than assets.
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Chapter 5: Merchandising Operations
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Sample Questions
Q1) In a multi-step income statement,which of the following items are NOT included in Operating income?
A) Net sales
B) Interest expense
C) Selling expenses
D) General expenses
Q2) The periodic inventory system keeps a running record of inventory and cost of goods sold.
A)True
B)False
Q3) Which of the following correctly describes the rate of inventory turnover?
A) It is how quickly inventory is received from the supplier after the order is placed.
B) It is how many days it takes the inventory to travel between the seller's warehouse and the buyer's warehouse.
C) It is how rapidly inventory is sold.
D) It is how many days it takes from the time an order is received to the day it is shipped.
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Chapter 6: Merchandising Inventory
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Sample Questions
Q1) What would the company's Cost of goods sold be on the December 31,2013 income statement if the perpetual Last-In,First-Out costing method is used? (Answers are rounded to the nearest dollar.)
A) $1,760
B) $1,810
C) $1,690
D) $1,540
Q2) Beginning inventory is $28,000.Purchases for the year are $110,000.Sales revenues are $180,000.The company's normal gross profit percent is 60%.How much is Estimated ending inventory?
A) $72,000
B) $246,000
C) $30,000
D) $66,000
Q3) Using the gross profit method,the amount of Gross profit would be:
A) $15,000.
B) $6,750.
C) $5,850.
D) $3,600.
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Chapter 7: Internal Control and Cash
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Sample Questions
Q1) If the bank reconciliation includes interest revenue,a journal entry is required which debits Cash and credits Interest revenue.
A)True
B)False
Q2) As long as the same person deposits customer checks and records the deposits into the ledger,there will be good internal control over cash receipts.
A)True
B)False
Q3) In a bank reconciliation,a deposit in transit will be shown on the bank side of the reconciliation.
A)True
B)False
Q4) Hofstra Services hired a new accounting manager.He signed a contract for a new accounting information system,but his position did not specify whether he was authorized to do so or not.
A) Assignment of responsibilities
B) Competent, reliable, and ethical personnel
C) Separation of duties
D) Documents
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Chapter 8: Receivables
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Sample Questions
Q1) Anchor Sales accepts credit cards from its customers.Assume Anchor makes a sale of $100 and the processor charges a 3% fee.Assume that the credit card processing company uses the net method of depositing funds.Provide the journal entry made by Anchor to record the sales revenue.
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\hline \quad\quad& \quad&\quad \\
\hline & & \\\hline & & \\ \hline \end{array}\]
Q2) Which of the following is included in the numerator of the acid-test ratio?
A) Cash plus inventory
B) Accounts receivable and inventory
C) Cash, accounts receivable and short-term investments
D) All current assets
Q3) At the end of the year,what is the balance in Uncollectible account expense?
A) $150
B) $800
C) $250
D) $1,450
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Page 10
Chapter 9: Plant Assets and Intangibles
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Sample Questions
Q1) On January 1,2014,Portwell Company purchased a patent for $200,000.They estimate a useful life of 4 years.At the end of 2014,the balance in the Patent account will be:
A) $200,000.
B) $210,000.
C) $250,000.
D) $150,000.
Q2) A gain on disposal of an asset is recorded when cash received is less than book value.
A)True
B)False
Q3) 0 What amount should be recorded as the land improvements cost?
A) $7,200
B) $101,200
C) $46,200
D) $106,200
Q4) A loss on disposal of an asset is recorded when cash received is less than book value.
A)True
B)False
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Chapter 10: Current Liabilities and Payroll
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Sample Questions
Q1) Warranty expense would be included in the liability section of the balance sheet.
A)True
B)False
Q2) Charter Services sells a service plan for commercial computer maintenance.The price is $1,200 per year,paid in advance.On December 1,2013,Charter sells a service plan to a new customer for cash.Please provide the journal entry to record this transaction.
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\hline \quad\quad\quad&\quad&\quad \\ \hline \\
\hline
\end{array}\]
Q3) Which of the following is pay stated as a percentage of a sale amount?
A) Bonuses
B) Benefits
C) Wages
D) Commissions
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Page 12
Chapter 11: Long-Term Liabilities, bonds Payable, and
Classification of Liabilities on the Balance Sheet
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Sample Questions
Q1) On December 31,2013,what will the balance be in the account titled Current portion of long-term notes payable?
A) $400
B) $48,000
C) $43,200
D) $4,800
Q2) After the second interest payment on December 31,2014,what was the balance in the discount account?
A) Debit of $540
B) Debit of $720
C) Debit of $480
D) Credit of $660
Q3) How will the note be shown on the balance sheet dated December 31,2012?
A) $48,000 shown as current liability only
B) $4,800 shown as current liability, $48,000 shown as long-term liability
C) $4,800 shown as current liability, $43,200 shown as long-term liability
D) Entire $48,000 shown as long-term liability
Q4) If a bond is issued at a discount,it will sell for more than face value.
A)True
B)False
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