Principles of Accounting Mock
Exam
Course Introduction
Principles of Accounting introduces the fundamental concepts and techniques used in the accounting profession, focusing on the recording, summarization, and interpretation of financial information. The course covers essential topics such as the accounting cycle, preparation of financial statements, and the principles underlying the recognition and measurement of assets, liabilities, equity, revenues, and expenses. Emphasis is placed on understanding Generally Accepted Accounting Principles (GAAP) and their application to real-world business scenarios. This foundational knowledge provides students with the skills necessary to analyze financial reports and make informed economic decisions in both personal and professional contexts.
Recommended Textbook
Cornerstones of Financial Accounting 2nd Edition by Jay Rich
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12 Chapters
1918 Verified Questions
1918 Flashcards
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Page 2
Chapter 1: Accounting and the Financial Statements
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202 Verified Questions
202 Flashcards
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Sample Questions
Q1) An income statement provides information at one specific point in time,while the other basic financial statements provide information on activities that occur over a period of time.
A)True
B)False
Answer: False
Q2) A company has current assets of $100,000,total assets of $250,000,current liabilities of $20,000,and long-term liabilities of $50,000.How much of its existing cash can the company use to acquire equipment without allowing its current ratio to decline below 2.0 to 1?
A)$ 40,000
B)$150,000
C)$180,000
D)$ 60,000
Answer: D
Q3) What is the purpose of an income statement?
Answer: An income statement reports the company's revenues and expenses for a period of time and shows the company's profitability (or lack of).The income statement is sometimes called the "profit or loss statement."
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Page 3
Chapter 2: The Accounting Information System
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177 Verified Questions
177 Flashcards
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Sample Questions
Q1) Refer to H&R Clock Company.Prepare a trial balance in proper format.Assume that the company had no additional accounts or balances other than those created from the July transactions.
Answer: \(\begin{array}{|l|l|c|}
\hline \text { H\&R Clock Conimany }\\
\hline \text { Trial Balance }\\
\hline \text { July 31, 2014 }\\
\hline \text { Account } &\text { Debit } & \text { Credit } \\
\hline \text { Cash } &\$ 44,260 & \\
\hline \text { Accounts Receivable } &3,000 & \\
\hline \text { Office Supplies } &5,100 & \\
\hline \text {Accounts Payable } &1 & -0- \\
\hline \text { Notes Payable } && 15,000 \\
\hline \text { CommonStock } && 15,000 \\
\hline \text { ServiceRevemue } && 26,800 \\
\hline \text { Utilities Expense } &640 & \\
\hline \text { Salaries Expense } &3,800 & \\
\hline \text { } &\$ 56,800 & \$ 56,800 \\
\hline \end{array}\)
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Page 4
Chapter 3: Accrual Accounting
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162 Verified Questions
162 Flashcards
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Sample Questions
Q1) Dividends,like expenses,are closed to the income summary account during the end-of-period closing process.
A)True
B)False
Answer: False
Q2) What happens to the accounting equation when the adjustment is recorded to recognize earned revenue previously recorded as unearned revenue?
A)Assets increase and liabilities increase
B)Liabilities decrease and Stockholders' equity increases
C)Assets decrease and liabilities decrease
D)Stockholders' equity increases and decreases by the same amount
Answer: B
Q3) The Dividend account is known as which of the following?
A)Temporary account
B)Closing account
C)Real account
D)Both b and c
Answer: A
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Chapter 4: Internal Control and Cash
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162 Verified Questions
162 Flashcards
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Sample Questions
Q1) Internal control over financial reporting is concerned with ensuring the reliability of the financial statements.
A)True
B)False
Q2) Which of the following is an example of a debit memo?
A)Notice of a bank service charge
B)Notice of interest earned on a checking account
C)Outstanding checks
D)A company's transposition error in the recording of a deposit
Q3) Each of the following documents is used in the control of cash receipts <b>except</b>:
A)NSF checks
B)Outstanding checks
C)Bank deposit slips
D)Bank credit memos
Q4) Checks presented for payment and paid by the bank are known as A)Certified checks
B)NSF checks
C)Outstanding checks
D)canceled checks
Page 6
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Chapter 5: Sales and Receivables
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) All of the following are true for a company that uses the allowance method of accounting for bad debts,EXCEPT:
A)It uses a contra-asset account called the allowance for doubtful accounts.
B)It records bad debt expense each time an account is determined to be uncollectible.
C)It reduces its accounts receivable balance when the account is written off.
D)It reports accounts receivable in the balance sheet at their net realizable value.
Q2) Refer to the information for Accent Flooring.At the maturity date,the customer pays the amount due for the note and interest.What entry is required on the books of Accent Flooring on the maturity date assuming that none of the interest had already been recognized?
A)Increase Cash and decrease Notes Receivable by $20,000
B)Increase Cash by $20,450,increase Interest Revenue by $450,and decrease Notes Receivable by $20,000
C)Increase Cash by $20,450,increase Notes Receivable by $20,000,and increase Interest Revenue by $450
D)No entry is required;the customer pays the amount due to Accent Flooring.
Q3) Identify two methods of accelerating cash from sales.
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Chapter 6: Cost of Goods Sold and Inventory
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191 Verified Questions
191 Flashcards
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Sample Questions
Q1) At the year-end inventory count,if goods in transit are shipped FOB shipping point,they should be included in the inventory count of:
A)the seller.
B)the buyer.
C)the shipping company.
D)both the seller and the buyer.
Q2) The excess of an inventory's value stated on a FIFO basis over its value stated on a LIFO basis is called a(n)____________________.
Q3) Dietz,Inc.sells merchandise on credit.If a customer pays its balance due within the discount period,what is the effect of the payment on Dietz's accounting equation?
A)Assets and stockholders' equity decrease.
B)Assets and stockholders' equity increase.
C)Assets decrease and liabilities increase.
D)Stockholders' equity decreases and liabilities increase.
Q4) A LIFO liquidation occurs when a company sells more units than it buys during the period.
A)True
B)False
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Page 8
Chapter 7: Operating Assets
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Sample Questions
Q1) Flossil Fossils Company purchased a tract of land containing coal in 2013 for $20,000,000 and then spent $30,000,000 to get a mine ready for operation.The company estimates that there will be 10,000,000 tons of coal available over the next 10 years.The land has a residual value of $500,000.During 2013,1,000,000 tons of coal were mined.
A) Compute the cost of the natural resource and the depletion rate.
B) Record the jounnal entry for the 2013 depletion.
Q2) Refer to Fabian Woodworks.What amount will be reported as depreciation expense over the 5-year life of the equipment?
A)$12,000
B)$ 8,000
C)$10,000
D)$ 4,000
Q3) An accumulated ________ account is used when writing off natural resources.
Q4) The reason some major intangible assets are <b>not </b>in the financial statements is because they cannot be measured.
A)True
B)False
Q5) Explain what costs are included in the acquisition cost of operating assets.
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Chapter 8: Current and Contingent Liabilities
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139 Verified Questions
139 Flashcards
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Sample Questions
Q1) A contingent liability must be recorded if it is reasonably possible and the amount can be reasonably estimated.
A)True
B)False
Q2) When a retail company sells products to customers on credit for the amount of the sales price plus the applicable sales tax,the related journal entry includes a debit to accounts receivable,a credit to sales revenue,and a credit to
Q3) What is the purpose of the current ratio? How does it differ from the quick ratio?
Q4) A(n)____________________ arises when a business purchases goods or services on credit.
Q5) A company's management expects to incur future expenses related to the repair or replacement of defective products sold.Those expenses must be matched to revenues in the period of the repair or replacement.
A)True
B)False
Q6) The operating cash flow ratio is computed by dividing cash flows from operating activities by ____________.
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Chapter 9: Long-Term Liabilities
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119 Verified Questions
119 Flashcards
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Sample Questions
Q1) Convertible bonds are attractive to bondholders because
A)they usually carry a higher rate of interest than non-convertible bonds.
B)they carry a convertible interest rate that can be increased when the market rate of interest increases.
C)they can be converted into stock at the bondholder's option.
D)the issuing company cannot retire the bonds before maturity.
Q2) Refer to Kaleidoscope Paint.What is the carrying value of the bonds after the first interest payment is made on June 30,2013?
A)$480,745
B)$482,282
C)$503,245
D)$500,000
Q3) A bond issue price is the present value of the cash flows that the bond will produce. A)True
B)False
Q4) Although operating leases are <b>not</b> recorded on the balance sheet by the lessee,they are disclosed in the ____________________
Q5) Obligations that extend beyond one year are referred to as
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Chapter 10: Stockholders Equity
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182 Flashcards
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Sample Questions
Q1) To compute the return on common equity ratio,the numerator includes ____________________ minus preferred dividends,and the denominator is the average common stockholders' equity.
Q2) On January 1,2012,a company issued 10,000 shares of 10%,$10 par value cumulative preferred stock.No dividends were declared in 2012 or 2013.In 2014,the company declared a dividend of $200,000.How much of the 2014 dividend should be paid to common stockholders?
A)$170,000
B)$190,000
C)$197,000
D)$200,000
Q3) Treasury shares represent the
A)number of previously issued shares that have been repurchased by the corporation. B)number of shares that the corporation has sold.
C)number of shares that are currently held by stockholders.
D)maximum number of shares that can be sold by the corporation.
Q4) ____________________ is the name of the account credited when a corporation issues common stock for a price greater than par.
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Page 12
Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) The following items were obtained from the financial records: \(\begin{array}{ll}
\text { Accounts receivable, December 31, 2014 } &\$ 100,000\\
\text { Accounts receivable, December 31, 2013 } &144,000 \\
\text { Sales for 2014 } & 945,000
\end{array}\) How would the change in accounts receivable be reported in the operating activities section of the statement of cash flows under the indirect method?
A)As an addition to sales.
B)As a deduction from sales.
C)As an addition to net income.
D)As a deduction from net income.
Q2) Which of the following measures can be used to evaluate a company's ability to meet future debt obligations after paying operating expenses,dividends and making capital expenditures?
A)Earnings per share
B)Net income
C)Cash flow adequacy ratio
D)Net increase or decrease in cash and cash equivalents
Q3) What is the amount of cash and cash equivalents at the end of 2014?
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13
Chapter 12: Financial Statement Analysis
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) Various financial ratios,including return ratios,are categorized as ____________________ ratios.
Q2) Why is liquidity important for businesses?
Q3) In evaluating a company's financial statements,the <b>least</b> useful information would be derived from a comparison of the current period data with A)economic and industry data.
B)another company in the same industry for the same period.
C)the same company's data from five years ago.
D)the same company's data from the prior year.
Q4) Return ratios are measures of the relationship between the A)profit earned and the investment made in the company by the various groups of creditors and investors.
B)revenue earned and the total equity of a company.
C)total equity of a company and its cash flows for the period.
D)profitability and liquidity aspects of a company.
Q5) What is meant by the concept of efficiency as it relates to turnover ratios? Explain.
Q6) Public companies file their annual reports on Form ____________________.
Q7) Trend analysis is another name for ____________________ analysis.
Page 14
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