Survey of Accounting Study Guide Questions
Course Introduction
Survey of Accounting provides students with an overview of fundamental accounting concepts and their applications in business decision-making. The course emphasizes both financial and managerial accounting principles, introducing topics such as the accounting cycle, preparation and analysis of financial statements, budgeting, cost behavior, internal controls, and basic financial analysis. Designed for non-accounting majors, this course equips students with the essential knowledge to interpret financial information and understand its role in effective organizational management and planning.
Recommended Textbook
Financial Accounting 12th Edition by C. William Thomas
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Chapter 1: The Financial Statements
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Q1) Current assets are assets expected to be converted to cash,sold,or consumed during the next:
A)12 months or within the business's operating cycle if longer than a year.
B)12 months or within the business's operating cycle if less than a year.
C)6 months.
D)24 months.
Answer: A
Q2) The owners' equity of a business is equal to:
A)revenues minus expenses.
B)assets minus liabilities.
C)assets plus liabilities.
D)paid-in capital plus assets.
Answer: B
Q3) The accounting equation shows the relationship among assets,liabilities and net income.
A)True
B)False
Answer: False
Q4) Four ways a business can be organized include:
Answer: Proprietorship,Partnership,Limited-liability company,and Corporation
Page 3
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Chapter 2: Transaction Analysis
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Q1) An example of a transposition error is writing:
A)$500 as $50.
B)$2,000 as $4,000.
C)$300 as $600.
D)$1,400 as $4,100.
Answer: D
Q2) Andy Company had a cash balance on May 1 of $27,000.At the end of May,the cash balance has increased to $31,000.During the month of May,Andy received cash of $48,000 from various sources.Based on this information,cash payments for the month of May were:
A)$27,000.
B)$31,000.
C)$44,000.
D)$75,000.
Answer: C
Q3) The total debits to an account must equal the total credits to the account.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Accrual Accounting Income
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Q1) A company purchased medical equipment for $130,000 on January 1,2018.The company determined that the yearly depreciation expense is $13,000.What will be the ending balance in the Accumulated Depreciation-Medical Equipment at December 31,2020?
A)$13,000
B)$39,000
C)$78,000
D)$130,000
Answer: B
Q2) A company has $800 in Prepaid Advertising before any adjustments.At the end of the year,an adjusting entry is made to debit Advertising Expense for $60.The ending balance in the Prepaid Advertising account will be:
A)$0.
B)$60.
C)$740.
D)$800
Answer: C
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Chapter 4: Internal Control Cash
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Q1) A check received from a customer for which there are not sufficient funds in the bank to cover the amount of the check is a(n):
A)service charge.
B)error.
C)nonsufficient funds check.
D)blank check.
Q2) The person who prepares the bank reconciliation:
A)should also be responsible for cash receipts.
B)should also be responsible for cash disbursements.
C)should be responsible for both cash receipts and cash disbursements.
D)should have no other cash duties.
Q3) Internal controls for cash receipts over the counter and for cash receipts by mail are identical.
A)True
B)False
Q4) Perpetrators of fraud usually commit fraud for their own short-term economic gain.
A)True
B)False
Q5) List the five internal control procedures.
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Chapter 5: Receivables and Revenue
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Q1) When calculating the quick ratio,________ is included in the numerator.
A)inventory
B)prepaid insurance
C)supplies
D)short-term marketable securities
Q2) Under the allowance method,Uncollectible-Account Expense is recorded in the same accounting period as the sale.
A)True
B)False
Q3) With regard to Accounts Receivable,a separate account for each customer is kept in a(n):
A)control account.
B)subsidiary ledger.
C)general ledger.
D)control ledger.
Q4) What amount does a company expect to collect from Accounts Receivable?
A)gross amount of Accounts Receivable
B)net realizable value of Accounts Receivable
C)gross amount of Accounts Receivable minus Allowance for Uncollectible Accounts
D)B and C
Page 7
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Chapter 6: Inventory Cost of Goods Sold
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Q1) On June 1,Nicholson Company purchased inventory on account with a cost of $1,600.Credit terms were 2/10,net 30.On June 2,Nicholson Company returned 50 percent of the inventory.Nicholson Company uses the perpetual inventory system.What journal entry did Nicholson Company prepare on June 2?
A)debit Purchase Returns for $1,600 and credit Accounts Payable for $1,600
B)debit Cash for $1,600 and credit Accounts Payable for $1,600
C)debit Purchase Returns for $800 and credit Accounts Payable for $800
D)debit Accounts Payable for $800 and credit Inventory for $800
Q2) Which inventory costing method provides the most current,up-to-date cost of inventory on the balance sheet?
A)FIFO
B)LIFO
C)average cost
D)specific identification
Q3) The inventory method used by a company affects:
A)net income on the income statement.
B)the income taxes to be paid.
C)the ending inventory on the balance sheet.
D)all of the above.
Q4) List three ways in which the gross profit method can be used by a retailer.
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Chapter 7: Plant Assets, natural Resources, Intangibles
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Q1) Land improvements include expenditures for:
A)paving the parking lot.
B)grading and clearing the land.
C)removing an unwanted building.
D)all of the above.
Q2) Return on assets measures how profitably management has used its assets.
A)True
B)False
Q3) For a plant asset that generates revenue evenly over time,which depreciation method best meets the expense recognition principle?
A)straight-line
B)double-declining-balance
C)modified accelerated
D)units-of-production
Q4) All intangible assets must be amortized.
A)True
B)False
Q5) Intangible assets can have either finite or indefinite lives.
A)True
B)False
9
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Chapter 8: Current and Contingent Liabilities
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Sample Questions
Q1) A bonus is an amount over and above regular compensation.
A)True
B)False
Q2) When a business receives cash from customers before earning the revenue,the ________ account is credited.
A)Accounts Receivable
B)Sales Tax Payable
C)Accounts Payable
D)Unearned Revenue
Q3) Long-term liabilities are incurred mostly for operating activities.
A)True
B)False
Q4) If Cost of Goods Sold is $300,000,beginning inventory is $29,000,and ending inventory is $30,000,then the purchases from suppliers (assume all on account)would be:
A)$359,000.
B)$299,000.
C)$301,000.
D)$59,000.
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Chapter 9: Long-Term Liabilities
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Q1) A bond will sell at a premium when:
A)the coupon rate is equal to the effective rate.
B)the coupon rate is greater than the effective rate.
C)the coupon rate is less than the effective rate.
D)the stated rate is less than the market rate of interest.
Q2) On January 1,2019,Anthony Corporation issued $1,000,000 of 6%,5-year bonds at 98,with interest paid annually.Using the straight-line amortization method,what is the carrying value of the bonds one year later on January 1,2020? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar. )
A)$980,000
B)$992,000
C)$984,000
D)$1,016,408
Q3) The carrying amount of bonds issued at a discount is calculated by:
A)subtracting Discount on Bonds Payable from Bonds Payable.
B)subtracting the sum of Discount on Bonds Payable and Interest Payable from Bonds Payable.
C)subtracting Interest Payable from Bonds Payable.
D)subtracting Interest Expense from Bonds Payable.
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Page 11
Chapter 10: Stockholders Equity
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Q1) A new corporation forms every time there is a change in ownership in the shares of common stock.
A)True
B)False
Q2) 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 20% and 50% 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.
Q3) When a company issues common stock at a price per share greater than its par value per share,the excess should be credited to:
A)Retained Earnings.
B)Common Stock.
C)Paid-in Capital in Excess of Par-Common.
D)Excess Capital.
Q4) The chairperson of the board of directors often has the title of:
A)Chief Financial Officer (CFO).
B)President.
C)Chief Executive Officer (CEO).
D)Chief Operating Officer (COO).
Page 12
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Chapter 11: The Statement of Cash Flows
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Q1) Depreciation expense is added to net income when reconciling net income to net cash provided by operating activities because it:
A)represents a cash inflow.
B)is a tax deduction that reduces the payment of taxes.
C)conserves cash outflows for taxes.
D)reduces net income but has no effect on cash,so we add depreciation expense to net income to cancel the deduction.
Q2) Increases and decreases in the long-term assets are reported on the statement of cash flows as:
A)operating activities.
B)investing activities.
C)financing activities.
D)noncash activities.
Q3) The purchase of treasury stock would be reported on a statement of cash flows as a:
A)cash outflow under the financing activities.
B)cash inflow under the investing activities.
C)cash inflow under the operating activities.
D)cash outflow under the investing activities.
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13
Chapter 12: Financial Statement Analysis
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Q1) What is accounts payable turnover?
A)A ratio calculated as Purchases divided by ending balance in Accounts Payable.
B)A ratio calculated as Cost of Goods Sold divided by average Accounts Payable.
C)A ratio calculated as Purchases divided by average Accounts Payable.
D)B and C.
Q2) Benchmarking common size variables against a key competitor provides meaningful information only if the companies are similar in size.
A)True
B)False
Q3) You are the CEO of Company A and you are using an industry leader (Leader Company)for benchmarking.Company A is much smaller than Leader Company in terms of total assets and total sales revenue.You should compare the:
A)gross profit of Company A to the gross profit of Leader Company.
B)net income of Company A to the net income of Leader Company.
C)net sales of Company A to the net sales of Leader Company.
D)net income to net sales ratio of Company A to net income to net sales ratio of Leader Company.
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Page 14
Chapter 13: Investments
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Q1) An investor owns 32% of the outstanding common stock of Leshan Company.Leshan Company reports net income of $90,000 for the current year.Which journal entry should the investor prepare?
A)debit Cash for $28,800 and credit Equity-method Investment Revenue for $28,800
B)debit Cash for $28,800 and credit Equity-method Investment for $28,800
C)debit Equity-method Investment for $28,800 and credit Equity-method Investment Revenue for $28,800
D)debit Equity-method Investment Revenue for $28,800 and credit Equity-method Investment for $28,800
Q2) If 15% of the common stock of an investee company is purchased as a long-term investment,the appropriate method of accounting for the investment is:
A)the equity method.
B)the consolidation method.
C)the fair value method.
D)the lower of cost or market method.
Q3) Investments accounted for by the equity method are recorded initially at cost.
A)True
B)False
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Chapter 14: Time Value of Money
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Q1) The present value of a single amount in the future can be determined using a present value of $1 table.
A)True
B)False
Q2) Whether making investments or borrowing money,we don't need to recognize the interest
we receive or pay.
A)True
B)False
Q3) The difference between the future value of an investment and the original investment is the amount of interest revenue that will be earned.
A)True
B)False
Q4) Most businesses ignore compound interest when calculating interest on debt or investments.
A)True
B)False
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