Accounting I Exam Materials
Course Introduction
Accounting I is an introductory course that explores the fundamental principles and concepts of financial accounting. Students learn how to systematically record, classify, and summarize financial transactions in accordance with standard accounting practices. Key topics include the accounting cycle, preparation of financial statements, analysis of basic transactions, and an introduction to assets, liabilities, and equity accounts. Emphasis is placed on understanding double-entry bookkeeping and using accounting software to prepare, analyze, and interpret financial information for sole proprietorships and small businesses. This course lays the groundwork for advanced study in accounting and related fields.
Recommended Textbook
Horngrens Accounting 10th Edition by Miller Nobles Mattison
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26 Chapters
3887 Verified Questions
3887 Flashcards
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Chapter 1: Accounting and the Business Environment
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Sample Questions
Q1) Which of the following statements would be most useful if an analyst wants to know the likelihood of repayment of his debts?
A)income statement
B)balance sheet
C)statement of owner's equity
D)statement of cash flows
Answer: B
Q2) Accounting is referred to as the language of business because it is the method of communicating business information to stakeholders.
A)True
B)False
Answer: True
Q3) Venus Inc. paid $5,000 for account payable. How does this transaction affect the accounting equation of Venus?
A)Assets decrease by $5,000 and equity increases by $5,000.
B)Assets decrease by $5,000 and liabilities decrease by $5,000.
C)Assets increase by $5,000 and equity decreases by $5,000.
D)Assets increase by $5,000 and liabilities increase by $5,000.
Answer: B
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Page 3
Chapter 2: Recording Business Transactions
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Sample Questions
Q1) A debit always means a decrease and a credit means increase.
A)True
B)False
Answer: False
Q2) Which of the following is an asset account?
A)Cash
B)Notes Payable
C)Owner's Withdrawals
D)Expenses
Answer: A
Q3) For Owner's Capital, the category of account and its normal balance is:
A)equity and a credit balance.
B)assets and a debit balance.
C)equity and a debit balance.
D)assets and a credit balance.
Answer: A
Q4) A liability account is increased by a debit.
A)True
B)False
Answer: False
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) The adjusted trial balance helps to identify:
A)account balances after adjustments.
B)revenue accounts only.
C)account balances before adjustments.
D)amounts that are out of balance.
Answer: D
Q2) The accountant of Barnes Architectural Services failed to make an adjusting entry to record $7,000 of depreciation expense. Which of the following statements is true?
A)The total revenue will be overstated.
B)The total revenue will be understated.
C)The total expenses will be overstated.
D)The total expenses will be understated.
Answer: D
Q3) Under accrual basis accounting, revenue is recorded only when cash is received.
A)True
B)False
Answer: False
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Rose Company earned revenues of $15,000 and incurred expenses of $9,000. The withdrawals of Mary Rose, the owner, were $3,000. What is the balance in the Income Summary account prior to closing net income or loss to the Rose, Capital account?
A)Debit balance of $6,000
B)Debit balance of $15,000
C)Credit balance of $6,000
D)Credit balance of $15,000
Q2) In the worksheet, the adjusted balance in the Service Revenue account is also recorded in the credit column of the income statement.
A)True
B)False
Q3) The assets that are expected to be converted to cash, sold, or used up during the next 12 months, or within the business's normal operating cycle if the cycle is longer than a year are called ________ assets.
A)intangible
B)plant
C)long-term
D)current
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Chapter 5: Merchandising Operations
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Sample Questions
Q1) In which of the financial statements do Merchandise Inventory and Cost of goods sold appear?
A)on the balance sheet and statement of owner's equity, respectively
B)on the statement of owner's equity and income statement, respectively
C)on the balance sheet and income statement, respectively
D)on the income statement and statement of cash flows, respectively
Q2) Even in a perpetual inventory system that updates the inventory account as and when transactions occur, the business must count inventory at least once in a year.
A)True
B)False
Q3) The net income calculated using both the single and multi-step formats of income statement is always the same.
A)True
B)False
Q4) When a company uses a perpetual inventory system, all merchandise transactions are updated as and when they occur; so, the inventory account will show the current balance at all times.
A)True
B)False
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Chapter 6: Merchandise Inventory
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Sample Questions
Q1) Best Deals has six CD players in ending merchandise inventory on December 31. The players were purchased in November for $170. The price lists from suppliers indicate the current replacement cost of a CD player to be $168. Which of the following statements is true of the effects of the adjustments to ending merchandise inventory on the cost of goods sold?
A)The cost of goods sold would increase by $2.
B)The cost of goods sold would not be affected.
C)The cost of goods sold would decrease by $12.
D)The cost of goods sold would increase by $12.
Q2) The Merchandise Inventory account is debited to write down the inventory as per the lower-of-cost-or-market rule.
A)True
B)False
Q3) The disclosure concept states that a company should report enough information for outsiders to make knowledgeable decisions about the company.
A)True B)False
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8
Chapter 7: Accounting Information Systems
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Sample Questions
Q1) Which of the following is an example of a source document in a computerized accounting information system?
A)purchase invoices
B)balance sheet
C)cash payments journal
D)income statement
Q2) Credit purchases are recorded in the purchases journal.
A)True
B)False
Q3) On May 4, a retail firm pays a rent of $1,500 for the month of April. Which of the following is true when this transaction is recorded in a cash payment journal?
A)Both assets and equity will increase by $1,500.
B)Both assets and liabilities will decrease by $1,500.
C)Both assets and equity will decrease by $1,500.
D)Both liabilities and equity will increase by $1,500.
Q4) All transactions are recorded in either one of the special journals or in the general journal, but not both.
A)True
B)False
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Chapter 8: Internal Control and Cash
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Sample Questions
Q1) A demand deposit at a bank is the most liquid of all company assets.
A)True
B)False
Q2) The following information is needed to reconcile the cash balance for Fire Steel Inc.
A deposit of $5,800 is in transit.
Outstanding checks total $1,500.
The book balance is $6,800 at February 28, 2013.
The bookkeeper recorded a $1,740 check as $17,400 in payment of the current month's rent.
The bank balance at February 28, 2013 was $18,000.
A deposit of $400 was credited by the bank for $4,000.
A customer's check for $3,700 was returned for nonsufficient funds.
The bank service charge is $60.
What was the adjusted bank balance?
A)$18,720
B)$18,700
C)$18,820
D)$18,060
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10
Chapter 9: Receivables
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Sample Questions
Q1) Which of the following is true of the proper balance sheet treatment of the Allowance for Bad Debts with a credit balance?
A)It is reported as a current liability.
B)It is reported as an operating expense.
C)It is reported as a separate, independent line item under current assets.
D)It is shown as a contra account related to accounts receivable.
Q2) Under both the allowance method and the direct-write off method of accounting for uncollectible accounts, the amount of bad debts expense is to be estimated at the end of each accounting period.
A)True
B)False
Q3) Which of the following statements is true?
A)Accounts receivable are more liquid than cash.
B)Notes receivable are always due in 30 days.
C)Notes receivable are longer in term than accounts receivable.
D)Accounts receivable are liabilities.
Q4) On July 1, 2015, Ealys Jewellers accepted a 3-month, 15% note for $6,000 in settlement of an overdue account receivable. Provide the journal entry to record the acceptance of the note.
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Chapter 10: Plant Assets, Natural Resources, and Intangibles
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Sample Questions
Q1) Which of the following accounting principles requires businesses to record depreciation?
A)the revenue recognition principle
B)the matching principle
C)the cost principle
D)the going concern principle
Q2) The expected cash value of an asset at the end of its useful life is known as:
A)book value.
B)residual value.
C)carrying value.
D)market value.
Q3) Which of the following is a characteristic of a plant asset, such as a building?
A)It is used in the operation of a business.
B)It is available for sale to customers in the ordinary course of business.
C)It has a short useful life.
D)It will have a negligible value at the end of its useful life.
Q4) According to generally accepted accounting principles, if the fair value of goodwill decreases, an impairment loss must be recorded.
A)True
B)False
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Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is under the OASDI limit of $110,100, and thus subject to FICA. He is also subject to federal income tax at a rate of 18%. Art has a deduction of $320 for health insurance and $80 for United Way. Which of the following is included in the entry in the payroll cycle to record the liability of payroll withholding deductions?
A)debit to Salary Payable
B)credit to United Way Payable
C)debit to FICA Tax Payable
D)debit Cash
Q2) Federal income taxes are:
A)deducted to arrive at an employee's gross pay.
B)added to arrive at an employee's net pay.
C)deducted to arrive at an employee's net pay.
D)not borne by the employee.
Q3) If a long-term liability is paid in installments, the maker will report the current portion of the note payable as a current liability.
A)True
B)False
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Page 13
Chapter 12: Partnerships
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Sample Questions
Q1) Nancy and Betty enter into a partnership agreement whereby they undertake to share profits according to the following rules: (a)Nancy and Betty will receive a salary of $11,500 and $23,500 respectively.
(b)The next allocation is based on 20% of the partner's capital balances.
(c)Any remaining profit or loss is to be borne completely by Betty. The partnership's net loss for the first year is $50,000. Nancy's capital balance is $90,000 and Betty's capital balance is $10,000 as at the end of the year. Calculate the share of profit (loss)to be borne by Nancy.
A)$29,500
B)$(18,000)
C)$11,500
D)$(79,500)
Q2) Upon liquidation of a partnership, the cash received from the sale of assets is first used to return the capital balances of the partners. The remaining cash is then used to pay off the liabilities of the business.
A)True
B)False
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Page 14
Chapter 13: Corporations
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Sample Questions
Q1) Which of the following is true of preferred stock?
A)Preferred shareholders generally receive a fixed amount of dividends before common stockholders do.
B)Preferred shareholders are guaranteed that they will not take a loss on their investment.
C)Preferred shareholders have higher voting rights than common shareholders.
D)Preferred shareholders may sell their shares for a price higher than that of common stock.
Q2) Landess Corporation currently has 120,000 shares outstanding of $1 par value common stock. The stock was originally issued for $12 per share. On March 15, the board of directors declares and distributes a 10% stock dividend when the stock is selling for $16 per share. Prepare the journal entry to record the stock dividend.
Q3) On the date of record of dividends, the company:
A)issues new shares of stock.
B)disburses dividend payments to shareholders.
C)records the dividend payable amount.
D)determines who owns the shares of stock as of that date.
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Page 15
Chapter 14: Long-Term Liabilities
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Sample Questions
Q1) The interest rate on which cash payments to bondholders are based is the:
A)market rate.
B)discount rate.
C)stated rate.
D)amortization rate.
Q2) A note payable can either be classified as a long-term liability or a short-term liability depending on the discretion of the accountant.
A)True
B)False
Q3) On November 1, 2014, Archangel Services issued $300,000 of 8-year bonds with a stated rate of 9% at par. The bonds make semiannual payments on April 30 and October 31. At December 31, 2014, Archangel made an adjusting entry to accrue interest at year-end. How much Interest Expense will be recorded at December 31, 2014?
A)$27,000
B)$4,500
C)$13,500
D)$14,200
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Chapter 15: Investments
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Sample Questions
Q1) All available-for-sale (AFS)investments are reported on the balance sheet at:
A)historical cost.
B)replacement cost.
C)current market value.
D)net realizable value.
Q2) Which of the following is true of consolidated statements?
A)They combine the balance sheets, income statements, and cash flow statements of the parent company with those of its peer group firms.
B)They combine the balance sheets, income statements, and cash flow statements of the subsidiary company using the consolidation method.
C)They combine the balance sheets, income statements, and cash flow statements of the subsidiary company with those of its investee firms.
D)They combine the balance sheets, income statements, and cash flow statements of the parent company with those of its controlling interest affiliates.
Q3) Debt securities do not include U.S. government securities.
A)True
B)False
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Chapter 16: The Statement of Cash Flows
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Sample Questions
Q1) Martin Company sold equipment for cash. The income statement shows a gain on sale of $920. The net book value of the asset prior to sale was $3,510. Which of the following statements describes the cash effect of the transaction?
A)negative cash flow of $4,430 for financing activities
B)negative cash flow of $2,590 for operating activities
C)positive cash flow of $4,430 from investing activities
D)positive cash flow of $2,590 from investing activities
Q2) The issue of Common Stock for cash will be shown as a:
A)negative cash flow in the investing section of the statement of cash flows.
B)positive cash flow in the investing section of the statement of cash flows.
C)negative cash flow in the financing section of the statement of cash flows.
D)positive cash flow in the financing section of the statement of cash flows.
Q3) Arturo Sales purchased some equipment for $12,000 by issuing a 6-month Note Payable. This would appear as a separate schedule of the cash flow statement under a section called non-cash investing and financing activities.
A)True
B)False
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Page 18
Chapter 17: Financial Statement Analysis
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Sample Questions
Q1) The cash ratio helps to determine a company's ability to meet its short-term obligations using cash and cash equivalents.
A)True
B)False
Q2) Which of the following items is a measure of a company's ability to collect receivables?
A)inventory turnover ratio
B)current ratio
C)day's sales in receivables
D)account receivable balance
Q3) The price/earnings ratio shows the market price of $1 of earnings.
A)True
B)False
Q4) Days' sales in inventory is a ratio measure that shows how quickly a company can collect its receivables.
A)True
B)False
Q5) Acid-test ratio helps to measure a company's ability to pay all its current liabilities if they came due immediately.
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Chapter 18: Introduction to Managerial Accounting
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Sample Questions
Q1) Which of the following is true of service companies?
A)All of service companies' costs are product costs.
B)Service companies modify and resell products they buy from manufacturers.
C)Revenues of service companies are only recorded on cash receipt.
D)Service companies carry no inventories of products for sale.
Q2) The balance sheet of a ________ company will show Work-in-Process Inventory as a line item.
A)manufacturing
B)merchandising
C)service
D)trading
Q3) A company used $35,000 of direct materials, incurred $73,000 in direct labor cost, and $114,000 in manufacturing overhead costs during the period. If beginning and ending Work-in-Process Inventories were $28,000 and $21,000 respectively, what is the cost of goods manufactured?
A)$250,000
B)$229,000
C)$215,000
D)$222,000
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Page 20
Chapter 19: Job Order Costing
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Sample Questions
Q1) The journal entry for adjustment of overallocated manufacturing overhead includes a:
A)credit to Finished Goods Inventory.
B)credit to Manufacturing Overhead.
C)debit to Work-in-Process Inventory.
D)credit to Cost of Goods Sold.
Q2) The journal entry to record allocation of manufacturing overhead to a particular job includes a:
A)debit to the Finished Goods Inventory account and credit to the Manufacturing Overhead account.
B)debit to the Work-in-Process Inventory account and credit to the Cash account.
C)debit to the Manufacturing Overhead account and credit to the Finished Goods Inventory account.
D)debit to the Work-in-Process Inventory account and credit to the Manufacturing Overhead account.
Q3) On June 30, Cleopatra Company finished Job 70 with total job costs of $40,000 and transferred the costs to Finished Goods Inventory. On July 6, Cleopatra completed the sale of the goods to a customer for $55,000 on account. Provide the journal entry to record the sales revenue.
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Page 21
Chapter 20: Process Costing
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Sample Questions
Q1) Nevada Manufacturing has two processing departments, Department I and Department II. During 2015, direct materials were assigned to the two production departments: $280,000 to Department I and $300,000 to Department II. During the period, $8,000 of indirect materials were used in production. Provide the journal entry to record this transaction.
Q2) If a business operates in an industry that experiences significant cost changes, it would be to its benefit to use the first-in, first-out (FIFO)method.
A)True
B)False
Q3) Companies that manufacture identical items through a series of uniform production steps use ________ to determine cost per unit sold.
A)a process costing system
B)a job order costing system
C)the weighted-average method
D)the first-in, first-out method
Q4) Direct labor costs are accumulated in the Manufacturing Overhead account.
A)True
B)False
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Chapter 21: Cost-Volume-Profit Analysis
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Sample Questions
Q1) The degree of operating leverage can be measured by:
A)dividing the contribution margin by operating income.
B)dividing the fixed costs by the sales price per unit.
C)multiplying the contribution margin to sales revenue.
D)dividing the fixed costs by contribution margin.
Q2) Sensitivity analysis empowers managers with better information for decision making by analyzing how various business strategies will affect profits earned by the company.
A)True
B)False
Q3) Variable cost per unit, within the relevant range, will:
A)increase as production decreases.
B)decrease as production decreases.
C)remain the same as production levels change.
D)decrease as production increases.
Q4) Higher fixed costs increase the total number of units required to break even. A)True
B)False
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Chapter 22: Master Budgets
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Sample Questions
Q1) Which of the following is true of the sales budget?
A)It provides sales values that are used to prepare financial statements for external reporting purposes.
B)It captures the variable and fixed expenses of the business.
C)It is used in the production budget.
D)It shows the value of expected production in a period.
Q2) While preparing the budgeted balance sheet of a merchandiser, the amount of merchandise inventory can be obtained from:
A)the merchandise inventory account.
B)the inventory, purchases and cost of goods sold budget.
C)the production budget
D)the capital expenditure budget and cash budget.
Q3) The capital expenditures budget is prepared before the preparation of the cash budget.
A)True
B)False
Q4) All organizations use one standardized budgeting process.
A)True
B)False
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Chapter 23: Flexible Budgets and Standard Cost Systems
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Q1) City Golf Center reported actual operating income for the current year of $65,000. The flexible budget operating income for actual volume is $55,000, while the static budget operating income is $58,000. What is the flexible budget variance for operating income?
A)$10,000 favorable
B)$10,000 unfavorable
C)$3,000 unfavorable
D)$3,000 favorable
Q2) Wood Designs Company, a custom cabinet manufacturing company, is setting standard costs for one of its products. The main material is cedar wood, sold by the square foot. The current cost of cedar wood is $4.00 per square foot from the supplier. Delivery costs are $0.25 per board foot. Carpenters' wages are $25.00 per hour. Payroll costs are $3.60 per hour and benefits are $5.00 per hour. How much is the direct materials cost standard (per square foot)?
A)$9.25 per square foot
B)$7.85 per square foot
C)$4.25 per square foot
D)$4.00 per square foot
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25
Chapter 24: Cost Allocation and Responsibility Accounting
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Sample Questions
Q1) Performance report of a profit center includes both revenues and expenses.
A)True
B)False
Q2) Companies calculate predetermined overhead rate at the beginning of an accounting period using the actual values of overhead costs.
A)True
B)False
Q3) Managers of investment centers are responsible not only for generating profits, but also for ensuring efficient use of assets of the investment center.
A)True
B)False
Q4) Which of the following four perspectives of the balanced score card enables the management to answer the question: "How can we continue to improve and create value?"
A)financial perspective
B)customer perspective
C)internal business perspective
D)learning and growth perspective
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Chapter 25: Short-Term Business Decisions
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Sample Questions
Q1) Lit Furniture manufactures a small table and a large table. The small table sells for $900, has variable costs of $750 per table, and takes 7.5 labor hours to manufacture. The large table sells for $1,500, has variable costs of $900, and takes 15 direct labor hours to manufacture. The small table has a lower contribution margin per unit, but a higher contribution margin per direct labor hour.
A)True
B)False
Q2) A company produces 100 microwave ovens per month, each of which includes one electrical circuit. The company currently manufactures circuit in-house but is considering outsourcing the circuits at a contract price of $28 each. Currently, the cost of producing circuits in-house includes variable costs of $26 per circuit and fixed costs of $5,000 per month. Assume the fixed costs are unavoidable, but that company could employ the vacated premises to earn rental income of $700 per month. How will it affect monthly operating income, if the company outsources?
A)Operating income will go up by $500.
B)Operating income will go down by $2,800.
C)Operating income will go down by $200.
D)Operating income will go up by $4,800.
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Chapter 26: Capital Investment Decisions
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Q1) The NPV method of evaluating capital investments suggests that a project with positive net cash inflows that exceed the cost of the investment should be accepted.
A)True
B)False
Q2) Which of the following best describes the term sensitivity analysis?
A)setting the budgets of an investment
B)analyzing the effect of an investment on workers' morale
C)evaluating different investment options
D)testing the results of an investment analysis with varying assumptions
Q3) Which of the following is a capital budgeting method that is used to screen potential investments?
A)return on assets
B)acid test ratio
C)accounting rate of return
D)debt-to-equity ratio
Q4) A major criticism of the payback method is that it focuses only on time to recover the investment, and ignores profitability.
A)True
B)False
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