Survey of Accounting Study Guide Questions
Course Introduction
Survey of Accounting offers an introduction to the foundational principles and practices of financial and managerial accounting. Designed for non-accounting majors, this course provides students with a broad overview of key accounting concepts, financial statement preparation and analysis, and the role of accounting information in decision-making. Topics include the accounting cycle, internal controls, budgeting, cost behavior, and basic financial reporting, equipping students with essential skills to understand and utilize accounting information in various organizational settings.
Recommended Textbook
Using Financial Accounting Information The Alternative to Debits and Credits 10th Edition by Gary
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Page 2
Chapter 1: Accounting As a Form of Communication
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Sample Questions
Q1) Cross Country Busline is an example of a A)producer.
B)supplier.
C)retailer.
D)service company.
Answer: D
Q2) If Cash is $26,000,what is the December 31,2017 capital stock balance?
A)$272,000
B)$240,000
C)$220,000
D)$400,000
Answer: B
Q3) Which one of the following statements is true concerning assets?
A)They are recorded at market value and then adjusted for inflation.
B)They are recorded at market value for financial reporting purposes as historical cost may be arbitrary.
C)Assets are used using the time-period approach.
D)Accountants use the term historical cost to refer to the original cost of an asset.
Answer: D
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Page 3
Chapter 2: Financial Statements and the Annual Report
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Sample Questions
Q1) The statement of cash flows,like the income statement,reports only operating activities of a company.
A)True
B)False
Answer: False
Q2) Which of the following events will cause a company's current ratio to decrease?
A)The sale of inventory for cash
B)The sale of inventory for credit (accounts receivable)
C)Issuing stock for cash
D)Paying off long-term debt with cash
Answer: D
Q3) Read the information about Moore Industries.The company's dividends for the year
A)reduce the amount of capital stock reported by the company.
B)are part of Moore Industries' operating costs.
C)are reported on the statement of retained earnings.
D)are an expense of Moore Industries.
Answer: C
Q4) ____________________ is the quality of accounting information that makes it comprehensible to those willing to spend the necessary time.
Answer: Understandability
4
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Chapter 3: Processing Accounting Information
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Sample Questions
Q1) The record in which transactions are initially recorded in chronological order as they occur is a(n)
A)general journal.
B)account of events.
C)general Ledger.
D)chart of accounts.
Answer: A
Q2) An entry made to the right side of an account is called a A)debit.
B)credit.
C)double-entry system.
D)journal entry.
Answer: B
Q3) Which of the following would be a case where an event as a transaction is not supported by a source document?
A)Purchase of inventory on credit
B)Cash sale
C)Credit sale
D)None of these are correct
Answer: D
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Chapter 4: Income Measurement and Accrual Accounting
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Sample Questions
Q1) An entry that includes the Cash account is probably an adjustment.
A)True
B)False
Q2) The difference between accrual-based revenue and accrual-based expenses is called _________________________.
Q3) Assuming the use of a work sheet,are the formal adjusting entries recorded and posted to the accounts before or after the financial statements are prepared? Explain your answer.Would your answer change if a work sheet was not prepared? Explain.
Q4) What effect does recognizing an accrued liability for utilities at the end of the accounting period have on the accounting equation?
A)Assets decrease and stockholders' equity decreases.
B)Liabilities increase and stockholders' equity increases.
C)Assets decrease and liabilities decrease.
D)Liabilities increase and stockholders' equity decreases.
Q5) Matching can occur directly (like cost of goods sold),indirectly (like plant assets),or immediately when no future benefits from the cost are expected.
A)True
B)False
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Page 6
Chapter 5: Inventories and Cost of Goods Sold
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Sample Questions
Q1) Several transactions of sales and purchase activities for Genoa Department Store are described below.
?
(A) Genoa purchases shoes from Nike on credit.
(B) Genoa returns defective shoes to Nike before payment is made to Nike for the shoes purchased in transaction \(A\).
(C) Genoa pays for the shoes purchased from Nike.
(D) Genoa sells shoes to its customers for cash and on credit.
(E) Credit customers return shoes to Genoa for a refund.
(F) Credit customers pay their account balances to Genoa. Required
For each transaction described of each transaction listed above on the company under a periodic inventory system.
Q2) The recognition of cost of goods sold as an expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the A)matching principle.
B)full disclosure principle.
C)revenue realization principle.
D)historical cost principle.
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Chapter 6: Cash and Internal Control
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Sample Questions
Q1) Checks received from customers are considered to be cash in the company's books.
A)True
B)False
Q2) Which of the following represents the subset of board of directors that acts as a direct contact between stockholders and the independent accounting firm?
A)External auditors
B)Internal audit staff
C)Audit committee
D)Stockholders' representative
Q3) When preparing a bank reconciliation,deposits in transit are
A)added to the bank statement balance.
B)deducted from the company's book balance.
C)added to the company's bank balance.
D)deducted from the bank statement balance.
Q4) The IFRS definition of cash equivalents is very similar to that used by __________.
Q5) The __________ is a subset of the board of directors that acts as a direct contact between the stockholders and the independent accounting firm.
Q6) A(n)__________ is a report required by section 404 of the Sarbanes-Oxley Act.
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Chapter 7: Receivables and Investments
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Sample Questions
Q1) A high accounts receivable turnover ratio could mean that the company's credit policies may be too stringent.
A)True
B)False
Q2) When one company purchases less than 50% of equity securities in a second company,which of the following statements is true?
A)The purchaser is referred to as the parent.
B)The purchaser is referred to as the subsidiary.
C)The company whose securities are purchased is the subsidiary.
D)The company whose securities are purchased is the investee.
Q3) When are consolidated financial statements prepared?
A)At the option of an investee company
B)At the option of an investor company
C)If one company owns more than 50% of another company
D)Only if one company owns 100% of another company
Q4) The contra-asset account used to reduce accounts receivable to its net realizable value is __________.
Q5) Cash flows from purchases,sales,and maturities of investments are usually classified as __________ activities.
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Chapter 8: Operating Assets: Property, Plant, and Equipment, and Intangibles
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Sample Questions
Q1) Wang Fitness Co. purchased a patent at the beginning of 2017 for $120,000. Economic benefits were expected for only 12 years, but the patent's legal life is 17 years. Also, during 2017, the company incurred research and development costs of $50,000.
A. Determine the following amounts:
1. Research and development expense for 2017
2. Patent amortization expense for 2017
B. Prepare the Intangible Assets section of the balance sheet at December 31, 2017.
Q2) Plant assets,current assets,property,plant,and equipment,and fixed assets are all intangible assets.
A)True
B)False
Q3) Asset turnover is calculated as Net Income divided by Average Total Assets.
A)True
B)False
Q4) _____________ is(are)the right to produce or sell a published work.
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Chapter 9: Current Liabilities, Contingencies, and the Time Value of Money
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Sample Questions
Q1) Redfern Company has current assets of $150,000 and current liabilities of $60,000.How much inventory could it purchase on account and achieve its minimum desired current ratio of 2 to 1?
A)$10,000
B)$20,000
C)$30,000
D)$40,000
Q2) What are examples of accounts that might be classified as accrued liabilities in the Current Liabilities section of the balance sheet?
Q3) Denise wants to help pay for her niece's college tuition.Her niece will begin college in one year.How much would Denise need to put into a savings account today at 6% so that her niece can withdraw $10,000 per year for four years and reduce the account balance to zero at the end of the four years?
A)$31,680
B)$34,650
C)$37,600
D)$37,720
Q4) Terms of 2/10,n/30 mean that if the discount is not taken,full payment is due within __________ days.
Page 11
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Chapter 10: Long-Term Liabilities
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Sample Questions
Q1) Which of the following trends can be unfavorable from the viewpoint of a bondholder?
A)The issuing company's debt ratio is steadily declining.
B)The issuing company's interest coverage ratio is steadily rising.
C)Market interest rates are steadily rising.
D)The issuing company's net cash flow from operating activities is steadily increasing.
Q2) Which of the following statements regarding bonds payable is true?
A)Generally,bonds are issued in denominations of $100.
B)When an issuing company's bonds are traded in the "secondary" market,the company will receive part of the proceeds when the bonds are sold from the first purchaser to the second purchaser.
C)A debenture bond is backed by specific assets of the issuing company.
D)Most bonds are term bonds,meaning that the entire principal amount will mature on a single date.
Q3) If an investor has the right to retire the bonds,they are referred to as callable.
A)True
B)False
Q4) Bonds were issued at a(n)__________ when the issue price exceeds the face value.
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Chapter 11: Stockholders Equity
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Sample Questions
Q1) The all-inclusive approach requires that all events and transactions that affect income should be reported on the income statement to help prevent the manipulation of income.
A)True
B)False
Q2) Which of the following should be considered when a company decides to declare a cash dividend on common stock?
A)The retained earnings balance only
B)The amount of authorized shares of common stock
C)The book value of the company's stock
D)The cash available and the retained earnings balance
Q3) When a company declares a 2-for-1 stock split,
A)stockholders' equity is doubled.
B)there is no effect on total stockholders' equity.
C)a shareholder who previously held 100 shares will have 300 shares after the split.
D)the price of each share will be one-third of what it was before the stock split.
Q4) Which accounts are used by a sole proprietorship that are not used by a corporation?
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Page 13
Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) When using the indirect method,how is the issuing of stock for cash shown on the statement of cash flows?
A)As an operating activity
B)As an investing activity
C)As a financing activity
D)As a Noncash investing and financing activity
Q2) Which of the following financing activities results in a cash inflow?
A)Buying treasury stock
B)Issuing bonds
C)Repaying a bank loan
D)Paying cash dividends
Q3) The statement of cash flows
A)along with the balance sheet and income statement is prepared on the accrual basis.
B)along with the balance sheet and statement of retained earnings is dated as of a specific year-end date.
C)along with the balance sheet is used to analyze liquidity.
D)ties the balance sheet to the statement of retained earnings.
Q4) An important __________ activity for many companies is acquiring property.
Q5) The purchase of merchandise is an important __________ activity for a retailer.
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) The acid-test ratio is a stricter test of a company's ability to pay its current debts as they are due than the current ratio is.
A)True
B)False
Q2) Refer to the data for Fawnsworth Industries.
Based on this information,what is Fawnsworth's inventory turnover ratio for the current period?
A)1.67 times
B)2.73 times
C)0.33 time
D)3.00 times
Q3) Which of the following formulas gives the inventory turnover ratio?
A)Net credit sales/Average inventory
B)Average inventory/Net credit sales
C)Cost of goods sold/Average inventory
D)Average inventory/Cost of goods sold
Q4) One measure of a company's overall long-term financial health is the debt-to-equity ratio.
A)True
B)False
Page 15
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Chapter 14: International Financial Reporting Standards
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Sample Questions
Q1) Significant differences exist in terms on financial statements around the world.For example,another name for what we know as Capital Stock in the United States is
A)Share Capital.
B)Capital Reserves.
C)Provisions for Other Risks.
D)Deferred Income.
Q2) Explain the meaning of the terms contingent liabilities and provisions as they relate to U.S.GAAP and IFRS?
Q3) All of the following statements are true regarding international legal systems except A)the common law system has its roots in the United Kingdom.
B)in common law countries,there are generally fewer statutes written into the laws.
C)in code law countries,there is more reliance on interpretations by the courts than in common law countries.
D)divergence in accounting standards is linked to differences in legal systems around the world.
Q4) Summarize some of the common differences between U.S.GAAP and IFRS.
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Page 16