Principles of Accounting Midterm
Exam
Course Introduction
Principles of Accounting introduces students to the fundamental concepts and techniques used in the accounting profession. The course covers the accounting cycle, including the recording, summarizing, and reporting of financial transactions, as well as the preparation and analysis of financial statements. Students will explore key topics such as double-entry bookkeeping, accrual versus cash accounting, internal controls, and the ethical responsibilities of accountants. By the end of the course, students will have a solid foundation in accounting principles and an understanding of how financial information is used for decision-making in organizations.
Recommended Textbook Survey of Accounting 5th Edition by
Carl S. Warren
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15 Chapters
1711 Verified Questions
1711 Flashcards
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Chapter 1: The Role of Accounting in Business
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94 Flashcards
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Sample Questions
Q1) The purchase of factory equipment would be an example of which type of business activity?
A)Financing
B)Investing
C)Operating
D)All of these
Answer: B
Q2) Which of the items below is NOT a business organization form?
A)Venture entrepreneurship
B)Proprietorship
C)Partnership
D)Corporation
Answer: A
Q3) More that 70% of businesses are organized as what type of business?
A)Not-for-profit
B)Corporation
C)Partnership
D)Sole proprietorship
Answer: D
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Page 3
Chapter 2: Basic Accounting Concepts
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Sample Questions
Q1) Paying expenses affects which financial statement elements?
A)Assets only
B)Stockholders' equity only
C)Assets and stockholders' equity
D)Assets and liabilities
Answer: C
Q2) The basic financial statements do NOT include the
A)income statement.
B)tax return.
C)balance sheet.
D)statement of cash flows.
Answer: B
Q3) Buying equipment for cash affects which accounts?
A)Cash only
B)Retained earnings only
C)Equipment and retained earnings
D)Cash and equipment
Answer: D
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4
Chapter 3: Accrual Accounting Concepts
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Sample Questions
Q1) XYZ Co.received $3,000 in payments from clients for services billed in a previous month.Which accounts will be affected and by what amounts under the accrual basis of accounting?
A)Cash will increase by $3,000 and accounts receivable decrease by $3,000.
B)Cash will increase by $3,000 and revenues will increase $3,000.
C)Accounts receivable will increase by $3,000 and revenue will increase by $3,000.
D)Accounts receivable will increase by $3,000 and cash will increase by $3,000.
Answer: A
Q2) Expenses on the income statement are assets used up or services consumed in the process of generating revenues.
A)True
B)False
Answer: True
Q3) The financial statements are affected by which type(s)of adjustments?
A)Deferrals
B)Accruals
C)Both deferrals and accruals
D)Neither deferrals nor accruals
Answer: C
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Page 5
Chapter 4: Accounting for Merchandising Businesses
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Sample Questions
Q1) If merchandise costing $2,500,terms FOB destination,2/10,n/30,with transportation costs of $100,is paid within 10 days,the amount of the purchases discount is $52.
A)True
B)False
Q2) Interest expense is an example of an expense classified under "other expense."
A)True
B)False
Q3) Merchandise is ordered on November 12;the merchandise is shipped by the seller and the invoice is prepared,dated,and mailed by the seller on November 15;the merchandise is received by the buyer on November 17;the transaction is recorded in the seller's accounts on November 15.If the credit terms are 1/10,n/30,the credit period begins with what date?
A)November 12
B)November 15
C)November 17
D)November 22
Q4) Merchandise inventory shrinkage will decrease Retained Earnings.
A)True
B)False
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Chapter 5: Sarbanes-Oxley,internal Control,and Cash
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) A firm's internal control environment is influenced by
A)management's operating style.
B)organizational structure.
C)personnel policies.
D)all of these.
Q2) The amount of the "adjusted balance" appearing on the bank reconciliation as of a given date is the amount that is shown on the balance sheet for that date after all adjusting entries have been entered.
A)True
B)False
Q3) The bank often informs the depositor of bank service charges by including a debit memorandum with the monthly bank statement.
A)True
B)False
Q4) In preparing a bank reconciliation,the amount indicated by a debit memorandum for bank service charges is deducted from the balance per bank statement.
A)True
B)False
Q5) What is the purpose of the Sarbanes-Oxley Act of 2002,and why was it enacted?
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Chapter 6: Receivables and Inventories
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Sample Questions
Q1) The maturity value of a 12%,60-day note for $5,000 is $5,100.
A)True
B)False
Q2) Using the first-in,first-out method,what is the cost of the merchandise inventory of 30 units on November 30?
A)$640
B)$605
C)$623
D)$660
Q3) The amount of the promissory note plus the interest earned on the due date is called the
A)realizable value.
B)maturity value.
C)face value.
D)net realizable value.
Q4) The difference between the total receivables and the balance in Allowance for Doubtful Accounts at the end of a period is referred to as the net realizable value of the accounts receivable.
A)True
B)False
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Chapter 7: Fixed Assets and Intangible Assets
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Sample Questions
Q1) Accelerated depreciation is primarily used for
A)the financial statements of large companies.
B)the financial statements of small companies.
C)income tax purposes.
D)both financial reporting and income taxes by most companies.
Q2) The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called
A)depletion.
B)deferral.
C)amortization.
D)depreciation.
Q3) Salvage value has a similar meaning as A)residual value.
B)scrap value.
C)book value.
D)both residual value and scrap value.
Q4) The straight-line method is appropriate if usage of the asset varies considerably from year to year.
A)True
B)False
Page 9
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Chapter 8: Liabilities and Stockholders Equity
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Sample Questions
Q1) If 50,000 shares are authorized,35,000 shares are issued,and 2,000 shares are reacquired,the number of outstanding shares is 33,000.
A)True
B)False
Q2) What options does a business have when financing operations?
A)Debt financing
B)Equity financing
C)Asset financing
D)Both debt financing and equity financing
Q3) When the contract rate of interest on bonds is less than the market rate of interest,the bonds sell at
A)a premium.
B)their face value.
C)their maturity value.
D)a discount.
Q4) The cost of a product warranty should be included as an expense in the A)period the cash is collected for a product sold on account.
B)future period when the cost of repairing the product is paid.
C)period of the sale of the product.
D)future period when the product is repaired or replaced.
Page 10
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Chapter 9: Financial Statement Analysis
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Sample Questions
Q1) Statements in which all items are expressed only in relative terms (percentages of a common base)are
A)horizontal statements.
B)percentage statements.
C)vertical statements.
D)common-size statements.
Q2) Which of the following is included in the computation of the quick ratio?
A)Prepaid rent
B)Accounts receivable
C)Inventory
D)Supplies
Q3) The tendency of the rate earned on stockholders' equity to vary disproportionately from the rate earned on total assets is sometimes referred to as
A)leverage.
B)solvency.
C)yield.
D)quick assets.
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Chapter 10: Accounting Systems for Manufacturing Businesses
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116 Flashcards
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Sample Questions
Q1) Which of the following items would NOT be classified as part of factory overhead?
A)Direct labor used
B)Amortization of manufacturing patents
C)Production supervisors' salaries
D)Factory supplies used
Q2) If the cost of employee wages is NOT a significant portion of the total product cost,the wages are classified as factory overhead cost.
A)True
B)False
Q3) If the cost of direct materials is a small portion of total production cost,it may be classified as part of
A)direct labor cost.
B)selling and administrative costs.
C)miscellaneous costs.
D)factory overhead cost.
Q4) Sales commissions is an example of factory overhead cost.
A)True
B)False
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Chapter 11: Cost Behavior and Cost-Volume-Profit Analysis
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139 Flashcards
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Sample Questions
Q1) The contribution margin ratio is
A)the same as the variable cost ratio.
B)the same as profit.
C)the portion of equity contributed by the stockholders.
D)the same as the profit-volume ratio.
Q2) The graph of a variable cost when plotted against its related activity base appears as a
A)circle.
B)rectangle.
C)straight line.
D)curved line.
Q3) The range of activity over which changes in cost are of interest to management is called the relevant range.
A)True
B)False
Q4) As production increases,what should happen to the variable costs per unit?
A)Stay the same
B)Increase
C)Decrease
D)Either increase or decrease,depending on the fixed costs
Page 13
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Chapter 12: Differential Analysis and Product Pricing
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Sample Questions
Q1) The dollar amount of desired profit from the production and sale of the company's product is
A)$97,200.
B)$67,200.
C)$73,500.
D)$96,000.
Q2) When deciding to make or buy a part needed for the manufacturing process,management needs to consider whether the plant has excess production capacity available to make the part or if current production will need to be interrupted to manufacture the part.
A)True
B)False
Q3) When standard costs are used in applying the cost-plus approach to product pricing,the standards should be based upon ideal levels of performance.
A)True
B)False
Q4) The highest contribution margin per scarce resource is the most profitable.
A)True
B)False
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Chapter 13: Budgeting and Standard Cost Systems
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Sample Questions
Q1) The formula to compute direct labor time variance is to calculate the difference between
A)actual costs - standard costs.
B)actual costs + standard costs.
C)(actual hours * standard rate)- standard costs.
D)actual costs - (actual hours * standard rate).
Q2) A negative fixed overhead volume variance can be caused due to the following EXCEPT
A)sales orders at a low level.
B)machine breakdowns.
C)employee inexperience.
D)increase in utility costs.
Q3) The amount of direct material A purchased during the year is A)$216,000.
B)$186,600.
C)$192,000.
D)$245,400.
Q4) The first budget to be prepared is usually the production budget.
A)True
B)False
Page 15
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Chapter 14: Performance Evaluation for Decentralized Operations
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Sample Questions
Q1) The balanced scorecard evaluates managers on financial and nonfinancial measures of performance.
A)True
B)False
Q2) Which of the following would be MOST effective in a small owner/manager-operated business?
A)Profit centers
B)Centralization
C)Investment centers
D)Cost centers
Q3) The ratio of income from operations to sales is termed the profit margin component of the rate of return on investment.
A)True
B)False
Q4) It is beneficial for related companies to negotiate a transfer price when the supplying company has unused capacity in its plant.
A)True
B)False
Page 16
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Chapter 15: Capital Investment Analysis
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Sample Questions
Q1) Periods in time that experience increasing price levels are known as periods of
A)inflation.
B)recession.
C)depression.
D)deflation.
Q2) In capital rationing,an initial screening of alternative proposals is usually performed by establishing minimum standards.Which of the following evaluation methods are normally used?
A)Cash payback method and average rate of return method
B)Average rate of return method and net present value method
C)Net present value method and cash payback method
D)Internal rate of return and net present value methods
Q3) Leasing assets may be a favorable alternative to purchasing assets if the asset has a high risk of becoming obsolete.
A)True
B)False
Q4) A series of unequal cash flows at fixed intervals is termed an annuity.
A)True
B)False
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