Accounting Concepts and Applications
Exam Practice Tests
Course Introduction
This course introduces the fundamental concepts and principles of accounting, focusing on how accounting information is used by individuals and organizations to make informed financial decisions. Students will explore the accounting cycle, including the recording, classification, and summarization of business transactions, as well as the preparation and interpretation of financial statements. Emphasis is placed on understanding the role of accounting in planning, control, and decision-making, with practical applications in real-world business scenarios. This foundational course provides essential knowledge and skills for further study in accounting and finance.
Recommended Textbook
Survey of Accounting 7th Edition by Carl Warren
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15 Chapters
1730 Verified Questions
1730 Flashcards
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Page 2
Chapter 1: The Role of Accounting in Business
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100 Flashcards
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Sample Questions
Q1) Profitability ratios such as can be used to analyze and assess a company's financial performance.
A)fixed assets turnover
B)current ratios
C)dividend payout ratios
D)return on assets
Answer: D
Q2) What is the basic accounting equation,and which financial statement is prepared from this equation?
Answer: Assets = Liabilities + Stockholders' Equity; the balance sheet is prepared from this equation.
Q3) Use the following information to determine Total Stockholders' Equity:
A)$58,000
B)$27,000
C)$32,000
D)$40,000
Answer: B
Q4) Fill in the missing amounts of the following balance sheet: Answer: a.$4,500 b.$9,000 c.$9,850 d.$32,550
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Chapter 2: Basic Accounting Concepts
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91 Flashcards
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Sample Questions
Q1) For EFG Co.,the transaction "payment to creditors" would:
A)increase total assets.
B)decrease total assets.
C)have no effect on total assets.
D)decrease stockholders' equity.
Answer: B
Q2) 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
Q3) Lewis Company has $25,000 in retained earnings,$40,000 in assets,and $11,000 in liabilities.How much is in common stock?
A)$29,000
B)$25,000
C)$14,000
D)$4,000
Answer: D
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Page 4
Chapter 3: Accrual Accounting Concepts
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115 Flashcards
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Sample Questions
Q1) St.Nick Corporation's Toy-Making Supplies account showed a beginning balance of $200 and supplies purchased of $800.There were $400 of supplies on hand at year-end.The year-end adjustment would include an increase in Toy-Making Supplies Expense for
A)$1,000.
B)$800.
C)$600.
D)$400.
Answer: C
Q2) Describe the differences between the cash and accrual bases of accounting. Answer: Under the cash basis of accounting,transactions are recorded when cash is affected.Revenue is recognized when cash is received,and expenses are recorded when cash is paid.Under accrual accounting,transactions are recorded as they occur,not just when cash is affected.Thus,revenue is recognized when it is earned.Expenses are recorded when they are incurred.
Q3) The fixed asset section of a balance sheet may also be labeled as property,plant,and equipment.
A)True
B)False Answer: True
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Chapter 4: Accounting for Merchandising Businesses
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145 Flashcards
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Sample Questions
Q1) Gross profit is equal to:
A)sales less (sales discounts and sales returns and allowances)plus cost of merchandise sold.
B)sales plus sales returns and allowances less sales discounts less cost of merchandise sold.
C)sales plus sales discounts less sales returns and allowances less cost of merchandise sold.
D)sales less (sales discounts and sales returns and allowances)less cost of merchandise sold.
Q2) When purchases of merchandise are made for cash,under the perpetual inventory system,the transaction:
A)increases Cash; decreases Merchandise Inventory.
B)increases Merchandise Inventory; decreases Cash.
C)increases Merchandise Inventory; decreases Cash Discounts.
D)increases Merchandise Inventory; decreases Purchases.
Q3) Net sales is equal to sales plus cost of merchandise sold.
A)True
B)False
Q4) Based on the following data,determine the cost of merchandise sold for October.
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Chapter 5: Sarbanes-Oxley, internal Control, and Cash
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) The Sarbanes-Oxley Act of 2002 requires companies and their independent accountants to:
A)report on the effectiveness of the company's internal controls.
B)report on any fraud and theft detected in the company.
C)report on the state of the economy and likelihood of fraud.
D)report on the financial activities of the company.
Q2) Minimum cash balance maintained in the bank account is called line of credit. A)True B)False
Q3) The Sarbanes-Oxley Act of 2002 applies to all publicly held companies. A)True B)False
Q4) The bank informs the depositor of bank service charges by including a credit memorandum with an monthly bank statement. A)True B)False
Q5) In preparing a bank reconciliation,the amount of deposits in transit is deducted from the cash balance per books.
A)True
B)False
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Chapter 6: Receivables and Inventories
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105 Flashcards
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Sample Questions
Q1) When merchandise sold is assumed to be in the order in which the expenditures were made,the inventory costing method is called:
A)first-in,last-out.
B)last-in,first-out.
C)first-in,first-out.
D)average cost.
Q2) Other than accounts receivable and notes receivable,name other receivables that might be included on the balance sheet.
Q3) Beginning inventory,purchases,and sales for Product XCX are as follows:
Q4) If the cost of an item of inventory is $60 and the current replacement cost is $65,the amount included in inventory according to the lower-of-cost-or market method is:
A)$5.
B)$60.
C)$65.
D)$125.
Q5) Prepare the Current Assets section of a balance sheet using some or all of the following accounts:
Q6) Beginning inventory,purchases,and sales for Product XCX are as follows:
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Chapter 7: Fixed Assets and Intangible Assets
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90 Flashcards
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Sample Questions
Q1) Goodwill refers to the excess of purchase price of a business over the fair value of its net assets.
A)True B)False
Q2) The total depreciation across the years of an asset's life is the same under the doubledecliningbalance method or the straight-line method.
A)True
B)False
Q3) Identify the following as a Fixed Asset (FA),Intangible Asset (IA),Natural Resource (NR),or None of these (N).
(a) Computer
(b) Patent
(c) Oil reserve
(d) Goodwill
(e) U.S. Treasury note
(f) Land used for employee parking
(g) Gold mine
Q4) Determine the cost of the land,based on the following data.
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Chapter 8: Liabilities and Stockholders Equity
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Sample Questions
Q1) 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.
Q2) If 20,000 shares are authorized,15,000 shares are issued,and 500 shares are reacquired,the number of outstanding shares is 19,500.
A)True
B)False
Q3) 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.
Q4) Indicate whether the following actions would (+)increase,(-)decrease,or (0)not affect a company's total assets,liabilities,and stockholders' equity.
Q5) The following information is for employee William Heedy for the week ended March 15.
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Chapter 9: Financial Statement Analysis
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Sample Questions
Q1) A decrease in the ratio of liabilities to stockholders' equity indicates an improvement in the margin of safety for creditors.
A)True
B)False
Q2) The percent of fixed assets to total assets is an example of:
A)vertical analysis.
B)solvency analysis.
C)profitability analysis.
D)horizontal analysis.
Q3) The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as:
A)solvency and leverage.
B)solvency and profitability.
C)solvency and liquidity.
D)solvency and equity.
Q4) The ratio of the market price per share of common stock on a specific date to the annual earnings per share is referred to as the price-earnings ratio.
A)True
B)False
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Chapter 10: Accounting Systems for Manufacturing Businesses
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119 Verified Questions
119 Flashcards
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Sample Questions
Q1) If the cost of direct materials is not a significant portion of the total product cost,it may be classified as:
A)direct labor costs.
B)selling and administrative costs.
C)miscellaneous costs.
D)factory overhead costs.
Q2) Activity-based costing is a method of accumulating and allocating costs by department.
A)True
B)False
Q3) At the end of the fiscal year,if the balance in Factory Overhead is small,it would normally be:
A)transferred to Work-in-Process.
B)transferred to Cost of Goods Sold.
C)transferred to Finished Goods.
D)allocated between Work-in-Process and Finished Goods.
Q4) Depreciation expense on factory equipment is part of factory overhead cost.
A)True
B)False
Q5) Use the correct number to designate each item below:
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Chapter 11: Cost Behavior and Cost-Volume-Profit Analysis
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140 Flashcards
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Sample Questions
Q1) The contribution margin ratio is the same as the variable cost ratio.
A)True
B)False
Q2) If direct materials cost per unit decreases,the break-even point will increase.
A)True
B)False
Q3) Variable costs are costs that vary in total in direct proportion to changes in the activity level.
A)True
B)False
Q4) For the current year ending January 31,Ringo Company expects fixed costs of $178,500 and a unit variable cost of $41.50.For the coming year,a new wage contract will increase the unit variable cost to $45.The selling price of $50 per unit is expected to remain the same.
(a) Compute the break-even sales (in units) for the current year.
(b) Compute the anticipated break-even sales (in units) for the coming year, assuming the new wage contract is signed.
Q5) Tops Company sells Products D and E and has made the following estimates for the coming year:
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Chapter 12: Differential Analysis and Product Pricing
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Sample Questions
Q1) The revenue that is forgone from an alternative use of an asset,such as cash,is called an opportunity cost.
A)True
B)False
Q2) Pearl Company is considering replacing equipment that originally costs $75,000.A new machine will cost $800,000 and the old equipment can be sold for $15,000.What is the sunk cost in this situation?
A)$15,000
B)$75,000
C)$800,000
D)$60,000
Q3) In which of the following pricing methods is the markup added to manufacturing cots and selling and expenses to determine the selling price?
A)Total cost method
B)Product cost method
C)Variable cost method
D)Fixed cost method
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14
Chapter 13: Budgeting and Standard Cost Systems
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Sample Questions
Q1) The standard factory overhead rate is $12 per machine hour ($10 for variable factory overhead and $2 for fixed factory overhead)based on 100% capacity of 42,000 machine hours.The standard cost and the actual cost of factory overhead for the production of 2,000 units were as follows:
Q2) Production estimates for August are as follows:
A)195,000 lbs.of A; 39,000 lbs.of B.
B)200,000 lbs.of A; 40,000 lbs.of B.
C)205,000 lbs.of A; 41,000 lbs.of B.
D)210,000 lbs.of A; 42,000 lbs.of B.
Q3) Microfix Company manufactures two models of Television,AR30 and AR33.Based on the following production data for April of the current year,prepare a production budget for April.
Q4) Which of the following would not lend itself to applying direct labor variances?
A)Computer help desk operator
B)Administrative assistant
C)Customer service personnel
D)Telemarketer
Q5) The standard cost is a detailed estimate of how much a product should cost.
A)True
B)False
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Chapter 14: Performance Evaluation for Decentralized Operations
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137 Flashcards
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Sample Questions
Q1) How much would Division B's income from operations increase?
A)$75,000
B)$175,000
C)$105,000
D)$70,000
Q2) Which transfer price approach is used when the transfer price is set at the amount sold to outside buyers?
A)Market price
B)Cost price
C)Negotiated price
D)Variable price
Q3) Which of the following expenses incurred by the sporting goods department of a department store is a direct expense?
A)Depreciation expense--office equipment
B)Insurance on inventory of sporting goods
C)Uncollectible accounts expense
D)Office salaries
Q4) The sales,income from operations,and invested assets for each division of Salem Company are as follows:
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Chapter 15: Capital Investment Analysis
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Sample Questions
Q1) When several alternative investment proposals of the same amount are being considered,the one with the largest net present value is the most desirable.If the alternative proposals involve different amounts of investment,it is useful to prepare a relative ranking of the proposals by using a(n):
A)average rate of return.
B)cash payback period.
C)present value index.
D)price-level index.
Q2) The present value index for this investment is:
A)1.00.
B)0.95.
C)1.25.
D)1.05.
Q3) Decisions to install new equipment,replace old equipment,and purchase or construct a new building are examples of:
A)sales mix analysis.
B)variable cost analysis.
C)cost-volume-profit analysis.
D)capital investment analysis.
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Page 17