Survey of Accounting Question Bank
Course Introduction
Survey of Accounting provides an introductory overview of both financial and managerial accounting concepts, designed for students who may not be pursuing a degree in accounting but require a foundational understanding for business decision-making. The course covers essential topics such as the accounting cycle, preparation and analysis of financial statements, budgeting, cost behavior, and performance evaluation. Emphasis is placed on how accounting information is used by managers, investors, and other stakeholders to assess organizational performance and make informed decisions. Through real-world examples and practical exercises, students develop the ability to interpret and utilize accounting data in various business contexts.
Recommended Textbook
Financial and Managerial Accounting 9th Edition by Belverd E. Needles
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Page 2
Chapter 1: Uses of Accounting Information and the Financial Statements
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Sample Questions
Q1) Fraudulent financial reporting can result from the misapplication of accounting principles.
A)True
B)False Answer: True
Q2) Which of the following assets could be described as nonphysical?
A) Buildings
B) Cash
C) Patents
D) Equipment Answer: C
Q3) The board of directors appoints the audit committee,which in turn performs an independent audit of the company's records.
A)True
B)False Answer: False
Q4) The purchase of equipment is an example of a financing activity.
A)True
B)False Answer: False
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Chapter 2: Analyzing Business Transactions
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Sample Questions
Q1) A company that receives money in advance of performing a service.What is the journal entry for the transaction?
A) Unearned Revenue - Debit; Accounts Payable - Credit
B) Cash - Debit; Unearned Revenue - Credit
C) Cash - Debit; Prepaid Fees - Credit
D) Cash - Debit; Accounts Receivable. - Credit
Answer: B
Q2) The ledger account form has a Balance column.
A)True
B)False Answer: True
Q3) The Office Supplies account is classified as a(n) A) expense.
B) stockholders' equity account.
C) asset.
D) liability, if the supplies have not yet been paid for. Answer: C
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Chapter 3: Measuring Business Income
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Sample Questions
Q1) In applying the matching rule,expenses should be recognized in the same accounting period as the revenues to which they are related..
A)True
B)False
Answer: True
Q2) An important purpose of closing entries is to
A) update the nominal accounts at year end.
B) set permanent account balances to zero to begin the next period.
C) help achieve the goals of the matching principle.
D) transfer net income or loss to Retained Earnings.
Answer: D
Q3) Accumulated depreciation is classified as a(n)
A) contra-expense account.
B) expense account.
C) contra-asset account.
D) liability account.
Answer: C
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Chapter 3: Supplement - Closing Entries and the Work Sheet
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Sample Questions
Q1) Working papers provide a written record of the work performed by the accountant.
A)True
B)False
Q2) In a manual system which uses a work sheet,the preparation of adjusting entries
A) typically precedes the preparation of the financial statements.
B) typically precedes preparation of the work sheet.
C) is easy because they are simply copied from the work sheet.
D) is difficult, and therefore they must first be entered into the general journal in pencil.
Q3) Typically,formal adjusting entries
A) are prepared prior to completion of the work sheet.
B) are prepared at the same time as closing entries.
C) need not be prepared if a work sheet has been completed.
D) are entered directly into the ledger.
Q4) The work sheet is prepared after the formal adjusting and closing entries.
A)True
B)False
Q5) The process of crossfooting requires vertical addition and subtraction.
A)True
B)False
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Chapter 4: Financial Reporting and Analysis
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Sample Questions
Q1) The convention of consistency refers to consistent use of accounting principles
A) among firms.
B) throughout the accounting period.
C) within industries.
D) among accounting periods.
Q2) To understand accounting information,users must be familiar with the accounting conventions,or rules of thumb,used in preparing financial statements.
A)True
B)False
Q3) Which of the following is not a measure of profitability?
A) Current ratio
B) Return on assets
C) Return on equity
D) Debt to equity ratio
Q4) Which of the following is not expressed in terms of a percentage?
A) Return on equity
B) Debt to equity ratio
C) Current ratio
D) Profit margin
Q5) State the definition of a current asset.
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Chapter 5: The Operating Cycle and Merchandising Operations
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Q1) The bonding of employees is an example of which feature of a good system of internal control?
A) Authorization of transactions
B) Limited access to assets
C) Sound personnel policies
D) Separation of duties
Q2) Sales Discounts and Sales Returns and Allowances are contra-revenue accounts.
A)True
B)False
Q3) When the terms of sale include a sales discount,it usually is advisable for the buyer to pay within the discount period.
A)True
B)False
Q4) Cost of goods sold is considered an expense of a merchandising business.
A)True
B)False
Q5) Under an effective system of internal control,errors occur only as a result of fraud or dishonesty.
A)True
B)False
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Chapter 6: Inventories
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Sample Questions
Q1) Freight charges associated with the purchase of inventory normally are not included in inventory cost.
A)True
B)False
Q2) Realizable value is the amount for which an inventory item can be resold.
A)True
B)False
Q3) The lower-of-cost-or-market rule implies that it is unrealistic to carry inventory at a cost that is in excess of its market value.
A)True
B)False
Q4) The portion of cost of goods available for sale that is not assigned to ending inventory is assigned to cost of goods sold.
A)True
B)False
Q5) In accounting for inventory,the assumed cost flow need not match the physical goods flow.
A)True
B)False
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Chapter 7: Cash and Receivables
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Sample Questions
Q1) Accounts receivable and inventory are considered short-term financial assets.
A)True
B)False
Q2) The allowance for uncollectible accounts is similar to accumulated depreciation in that it represents the total of all accounts written off over the years.
A)True
B)False
Q3) The matching rule
A) results in the recording of a known amount for bad-debt losses.
B) necessitates the recording of an estimated amount for bad debts.
C) requires that all bad-debt losses be recorded when an individual customer defaults.
D) is violated when the allowance method is employed.
Q4) Customers' accounts with credit balances should be disclosed as a(n)
A) expense on the income statement.
B) current liability on the balance sheet.
C) offset to Accounts Receivable on the asset side of the balance sheet.
D) note to the financial statements.
Q5) On a balance sheet,what items normally are included in Cash?
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Chapter 8: Current Liabilities and Fair Value Accounting
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Sample Questions
Q1) Vacation pay is charged properly as an expense in the month in which the employee takes a vacation.
A)True B)False
Q2) The entry that includes a debit to Payroll Taxes and Benefits Expense also includes credits to Federal Unemployment Tax Payable and State Unemployment Tax Payable.
A)True B)False
Q3) A business accepts a 9 percent,$25,000 note due in 120 days.Assuming simple interest,how much (amount rounded)will the business receive when the note falls due?
A) $25,000
B) $25,075
C) $25,740
D) $27,260
Q4) Liabilities generally arise from past transactions. A)True B)False
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11
Chapter 9: Long Term Assets
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Q1) Carrying value
A) equals cost minus accumulated depreciation.
B) equals cost minus residual value.
C) is the expired cost of an asset.
D) is the same as residual value.
Q2) Saticoy Corporation purchased a truck for $50,000.The company expected the truck to last five years or 100,000 miles,with an estimated residual value of $5,000 at the end of that time.During the second year,the truck was driven 23,000 miles.Compute the depreciation for the second year under each of the following methods: (a)straight-line,(b)production,and (c)double-declining-balance.(Show your work.)
Q3) Office furniture was purchased for $45,000.It had an estimated residual value of $7,000 and has a current carrying value of $9,000.Its depreciable cost must have been A) $36,000. B) $38,000. C) $32,000.
D) $29,000.
Q4) What is goodwill and when may it be recorded?
Q5) Present two arguments in favor of the use of accelerated depreciation.
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Chapter 10: Long-Term Liabilities
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Sample Questions
Q1) A capital lease is a lease of property,plant,or equipment that is in effect an installment purchase.
A)True
B)False
Q2) The responsibility for receiving the proper amount of interest falls on the bondholder most heavily in the case of A) term bonds.
B) serial bonds.
C) coupon bonds.
D) registered bonds.
Q3) When a bond sells at a discount,what is probably true about the market interest versus the face interest rate? Discuss.
Q4) Interest coverage ratio is a measure of A) financial leverage.
B) income after taxes and interest divided by interest expense.
C) stockholders' control.
D) protection from default on interest.
Q5) When bonds are converted to common stock,what is the basis for recording (valuing)the stock issued?
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Chapter 11: Contributed Capital
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Sample Questions
Q1) Prepare in proper form the stockholders' equity section of the balance sheet from the following selected accounts and balances taken from the adjusted trial balance of Waller Corporation as of December 31,20xx.
\[\text { Partial Adjusted Trial Gaalance }\]
\(\begin{array}{|l|r|r|}
\hline \text { Account } & \text { Debit } & \text { Credit } \\
\hline \text { Common Stock- } \$ 10 \text { par value, } 90,000 \text { shares authorized, } 40,000 & \\
\quad \text { shares issued and outstanding } && 400,000 \\
\text { Preferred Stock- } \$ 100 \text { par value, } 7 \text { percent cumulative, } 50,000
\text { shares } & \\
\quad \text { authorized, 8,000 shares issued and outstanding } && 800,000 \\
\text { Additional Paid-in Capital, Preferred } & &30,000 \\
\text { Additional Paid-in Capital, Common } && 200,000 \\
\text { Retained Earnings } && 100,000 \\
\hline
\end{array}\)
Q2) When stock is issued for noncash assets or services,how does one place a valuation (dollar amount)on the transaction?
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Chapter 12: Investments
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Sample Questions
Q1) On January 1,2010,Remco Corporation purchased 5,000 shares of Lowell Corporation common stock for $60 per share.Remco's investment represents 30 percent of the total outstanding shares of Lowell.During 2010,Lowell paid total dividends of $100,000.Remco appropriately used the equity method to account for this investment and accordingly reported the investment at a carrying value of $390,000 on December 31,2010.Compute the amount of earnings reported by Lowell Corporation for 2010.
Q2) For available-for-sale equity securities,the Unrealized Loss on Long-Term Investments account should be reported as a(n)
A) "other loss" item on the income statement.
B) prior period adjustment.
C) separate item in the stockholders' equity section of the balance sheet.
D) extraordinary item on the income statement.
Q3) When the accounting period ends before U.S.Treasury bills are scheduled to mature,the investor's adjusting entry would include a
A) debit to Short-Term Investments.
B) debit to Cash.
C) debit to Interest Income.
D) credit to Interest Payable.
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Chapter 13: The Corporate Income Statement and the Statement of
Stockholders Equity
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Sample Questions
Q1) Gains and losses caused by the passage of a new law should be classified as extraordinary on the income statement.
A)True
B)False
Q2) A company had 48,000 shares outstanding from January 1 to June 1 and 72,000 shares outstanding from June 1 to December 31.What is the weighted-average number of shares used in earnings per share calculations?
A) 58,000
B) 60,000
C) 62,000
D) 64,000
Q3) The amount of income taxes expense appearing on a corporation's income statement must be calculated in accordance with the matching principle.
A)True
B)False
Q4) The income statement's bottom-line figure (net income or loss)must be shown "net of tax."
A)True
B)False
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Chapter 14: The Statement of Cash Flows
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Sample Questions
Q1) Royer Corporation engaged in this transaction: Collected accounts receivable. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.
A) Does not represent a cash flow
B) Operating activities section
C) Financing activities section
D) Investing activities section
Q2) Give two explanations for why the amount of cash outflow for equipment for the year might not equal the increase in the Equipment account balance from one balance sheet date to the next.
Q3) If net cash flows from operating activities were $316,000,net income were $200,000,and sales were $2,000,000,cash flows to sales would equal (Round amounts to one decimal place)
A) 10.0 percent.
B) $116,000.
C) 15.8 percent.
D) 0.6 times.
Q4) Cash inflows and outflows are easier to manipulate than earnings.
A)True
B)False
Page 17
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Chapter 15: The Changing Business Environment - a Managers Perspective
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Q1) Most management decisions are based on analyses using expected future dollars.
A)True
B)False
Q2) What are the results of the successful implementation of a JIT operating environment?
Q3) Which of the following is not a key question to be addressed when preparing a report?
A) Who?
B) What?
C) When?
D) Where?
Q4) The balance scorecard
A) is rarely used.
B) produces formal reports.
C) only applies to manufacturing companies.
D) links the organization's perspectives with stakeholders.
Q5) The keys to successful report writing include identifying the who,what,when,and why of the report.
A)True
B)False
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Chapter 16: Cost Concepts and Cost Allocation
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Q1) Both direct labor and indirect labor are recorded in the Work in Process Inventory account as the product is being manufactured.
A)True
B)False
Q2) When a company uses a single predetermined overhead rate to assign overhead to production,only one cost pool is used.
A)True
B)False
Q3) Which of the following is a source document for materials?
A) Vendor's invoice
B) Materials request
C) Receiving report
D) All of these
Q4) Overhead has been underapplied when the
A) Overhead account has a credit balance.
B) Overhead account has a debit balance.
C) company has overspent in the overhead cost area.
D) adjusting entry to account for the underapplied overhead involves a credit to Cost of Goods Sold.
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Chapter 17: Costing Systems- Job Order Costing
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Sample Questions
Q1) A job order cost card is a type of subsidiary ledger.
A)True
B)False
Q2) Applied overhead exceeds actual overhead when the
A) Overhead account has a credit balance.
B) journal entry to account for the difference involves a debit to Cost of Goods Sold.
C) Overhead account has a debit balance.
D) company has overspent in the overhead cost area.
Q3) Accounting for the incurrence of __________ does not change significantly between job order costing and process costing.
A) selling expenses
B) direct materials and conversion costs
C) direct materials costs
D) conversion costs
Q4) In cost-plus contracts,the "plus" represents A) sales price.
B) profit, based on the amount of costs incurred.
C) overapplied overhead costs.
D) the amount of any cost overruns.
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Chapter 18: Costing Systems- Process Costing
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Q1) Use the following data from a company using a process costing system to answer the question below. Beginning Work in Process Inventory on June 1 : 1,000 units - 100 percent complete as to direct materials 80 percent complete as to conversion costs conversion costs
Units Started During June: 6,400 units
Ending Work in Pracess Inventory on June 30: 1,200 units - 100 percent complete as to direct materials 40 percent complete as to conversion costs
The company uses average process costing method. Equivalent units for conversion costs during the month totaled A) 7,920. B) 7,680. C) 6,680. D) 5,880.
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Chapter 19: Value-Based Systems- Abm and Lean
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Q1) A supply chain is a related sequence of value-creating activities within an organization.
A)True
B)False
Q2) Which one of the four levels of the cost hierarchy would be used by a dress manufacturer that uses activity-based management for the routine maintenance of sewing machines?
A) Unit-level activity
B) Batch-level activity
C) Product-level activity
D) Facility-level activity
Q3) In a traditional environment,costs are tracked through the various production departments as products or services move through the production process.
A)True
B)False
Q4) Activity-based management is an extension of activity-based costing.
A)True
B)False
Q5) Why is process value analysis not part of the general ledger accounting system?
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Chapter 20: Cost Behavior Analysis
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Q1) Regression analysis can be performed using one or more activities to predict costs.
A)True
B)False
Q2) The engineering method of separating costs
A) is generally used to estimate the cost of activities and new products.
B) is sometimes called a time and motion study.
C) is expensive to use because it is so detailed.
D) All of the above are correct.
Q3) Depreciation calculated using the production or units of output method is an example of a fixed cost.
A)True
B)False
Q4) Campground,Inc.,is considering the production and sale of propane lamps.Annual fixed costs associated with the project are expected to total $60,000.In addition,each lamp would sell for $12 and would require $7 in variable costs.Calculate (a)the breakeven point in units,(b)the breakeven point in dollars,(c)the number of lamps that must be sold to earn a profit of $120,000,and (d)the operating income or loss at a sales volume of 16,000 lamps.
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Chapter 21: The Budgeting Process
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Q1) A continuous budget is a 12-month forward rolling budget that summarizes budgets for the next 12 months.
A)True
B)False
Q2) Static budgets are prepared on quarterly basis and require frequent change during the annual budget period.
A)True B)False
Q3) A company seeks to have as much cash as possible on hand.Cash budgeting helps to accomplish this.
A)True
B)False
Q4) As part of the budgeting process,managers evaluate operational,tactical,value chain,and capacity issues.
A)True B)False
Q5) Describe three benefits budgeting provides to an organization's success.
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Chapter 22: Performance Management and Evaluation
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Q1) How effective a performance management and evaluation system is depends on how well the goals of the entire company are coordinated rather than on how well the goals of individual responsibility centers and managers are coordinated.
A)True
B)False
Q2) Identify and describe the five different responsibility centers,and provide one example of each.
Q3) How is the contribution margin calculated when utilizing variable costing?
A) Sales less variable cost of goods sold
B) Sales less variable cost of goods sold, less variable selling and administrative expenses
C) Sales less cost of goods sold
D) Sales less variable cost of goods sold, less variable selling and administrative expenses, less fixed cost of goods sold, less fixed selling and administrative expenses
Q4) A variable costing income statement is essentially the same as a traditional income statement.
A)True
B)False
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Chapter 23: Standard Costing and Variance Analysis
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Q1) Underfoot Products uses standard costing.The following information about overhead was generated during May: \[\begin{array} { l l }
\text { Standard variable overhead rate } & \$ 2 \text { per machine how } \\
\text { Standard fixed overhead rate } & \$ 1 \text { per machine hour } \\
\text { Actual variable overhead costs } & \$ 390,000 \\
\text { Actual fixed cverhead costs } & \$ 175,000 \\
\text { Budgeted fixed cverhead costs } & \$ 190,000 \\
\text { Standard machine hours per unit produced } & 10 \\
\text { Good units produced } & 18,000 \\
\text { Actual machine hours } & 200,000
\end{array}\]
Compute the fixed overhead volume variance.
A) $5,000 (U)
B) $10,000 (U)
C) $10,000 (F)
D) $15,000 (F)
Q2) The importance of direct labor standards and variances has been reduced.
A)True
B)False
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Chapter 24: Short Run Decision Analysis
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Q1) Which of the following techniques is most useful for a special order decision?
A) Payback method
B) Present value method
C) Accounting rate-of-return method
D) Incremental analysis
Q2) Outsourcing production or operating activities will help in improving the cash flow by reducing investment in physical assets.
A)True
B)False
Q3) Estimated future costs that differ between alternative courses of action are termed __________ costs in management decision analysis.
A) variable overhead
B) relevant
C) absorption
D) replacement
Q4) While performing an incremental analysis for outsourcing decision,information such as depreciation and other fixed costs are not relevant.
A)True
B)False
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Chapter 25: Capital Investment Analysis
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Q1) A minimum rate of return will be set by the organizations to guard
A) the minimum costs
B) the profitability
C) fixed costs
D) variable costs
Q2) Depending on the mixture of sources of capital,a company's cost of capital will vary.
A)True
B)False
Q3) Chicago Co.is interested in purchasing a machine that would improve its operational efficiency.The cost is $200,000 with an estimated residual value of $20,000 and a useful life of eight years.Cash inflows are expected to increase by $40,000 a year.The company's minimum rate of return is 10 percent.The present value of $1 for eight years at 10 percent is 0.467,and the present value of an annuity of $1 at 10 percent and eight years is 5.335. The net present value of the project is
A) $74,520.
B) $120,100.
C) $93,400.
D) $22,740.
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Chapter 26: Pricing Decisions,incltarget Costing and Transfer Pricing
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Q1) Both internal and external factors can influence the pricing decision.
A)True
B)False
Q2) To stay in business,a company must have a selling price that is A) acceptable to the customer.
B) able to recover the variable costs of production.
C) the highest in the marketplace.
D) equal to or lower than the company's costs per unit.
Q3) The cost-plus transfer price is the sum of the costs incurred by the producing division plus an agreed-upon profit percentage.
A)True
B)False
Q4) The primary internal factor to be considered in product pricing is the cost of the product or service.
A)True
B)False
Q5) Cost and price information are irrelevant to transfer prices.
A)True
B)False
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Chapter 27: Quality Management and Measurement
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Q1) Some companies have moved to JIT without changing the substance of their accounting systems.Relying on the former accounting system may present problems for management because
A) traditional accounting systems are designed to track items (labor efficiency, purchase price, overhead absorption) that are no longer primary concerns of management.
B) control of cost drivers will be lost.
C) managers do not understand the new manufacturing environment.
D) traditional accounting systems discourage the creation of large inventories that are necessary to ensure uninterrupted production runs.
Q2) The two components of costs of quality are costs of conformance and costs of nonconformance.
A)True
B)False
Q3) Traditional management information systems focus on financial reporting.
A)True
B)False
Q4) Identify and describe three traits that differentiate management information systems (MIS)from traditional management accounting techniques.
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Chapter 28: Financial Analysis of Performance
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Sample Questions
Q1) A balance sheet that displays only component percentages is called a A) condensed balance sheet.
B) comparative balance sheet.
C) segmented balance sheet.
D) common-size balance sheet.
Q2) How would the collection of an account receivable affect the current ratio and the quick ratio,respectively?
A) No effect on current ratio; increase in quick ratio
B) Increase in current ratio; increase in quick ratio
C) No effect on current ratio; no effect on quick ratio
D) Decrease in current ratio; decrease in quick ratio
Q3) One reason that a common-size statement is a useful tool in financial performance evaluation is that it enables the user to
A) make better comparisons of two companies of different sizes in the same industry.
B) determine which companies in a single industry are of the same size.
C) judge the relative potential of two companies of similar size in different industries.
D) determine which companies in a single industry are of the same value.
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