Accounting I Test Preparation
Course Introduction
Accounting I provides an introduction to the fundamental principles and concepts of financial accounting. The course covers the accounting cycle, including the identification, recording, and reporting of financial transactions for service and merchandising businesses. Students will learn to prepare and interpret basic financial statements such as the balance sheet, income statement, and statement of owner's equity. Emphasis is placed on understanding debits and credits, the use of accounting journals and ledgers, and the application of generally accepted accounting principles (GAAP). This foundational course is essential for students pursuing studies in business, finance, or accounting.
Recommended Textbook
Financial Accounting 9th Edition by Walter T. Harrison
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13 Chapters
2240 Verified Questions
2240 Flashcards
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Chapter 1: The Financial Statements
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174 Flashcards
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Sample Questions
Q1) The income statement:
A) is not dated.
B) must cover only a month in time.
C) covers a defined period of time.
D) reports the results of operations since the inception of the business.
Answer: C
Q2) Mutual agency of a partnership means that each partner may conduct business in the name of the partnership and can legally bind all the partners without limit for the partnership's debts.
A)True
B)False
Answer: True
Q3) Refer to Exhibit 1.3. Net income for ABC Company for the year was:
A) $83,000.
B) $91,000.
C) $115,000.
D) $176,000.
Answer: B
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Chapter 2: Transaction Analysis
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Sample Questions
Q1) When computing the normal balance of an account:
A) salaries expense should have a credit balance.
B) accounts payable should have a credit balance.
C) equipment can have either a credit or debit balance.
D) notes payable can have either a credit or debit balance.
Answer: B
Q2) Which of the following is a true statement?
A) In most accounting systems, the journal, but not the ledger is computerized.
B) In the phrase "keeping the books," books refers to the journals and the ledger.
C) The journal entry shows the balance in each account.
D) If entries are correctly entered in the journal, the same data does not need to be entered in the ledger.
Answer: B
Q3) Every transaction:
A) must increase at least one account and decrease at least one account.
B) must debit at least one account and credit at least one account.
C) is recorded in either the journal or the ledger.
D) affects both an income statement account and a balance sheet account.
Answer: B
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Page 4
Chapter 3: Accrual Accounting Income
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205 Verified Questions
205 Flashcards
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Sample Questions
Q1) To help keep debt ratios within normal limits, companies might adopt the following strategies:
A) decrease revenues.
B) sell stock.
C) choose to borrow more money.
D) increase costs.
Answer: B
Q2) The expense recognition principle recognizes expenses in the same period in which any related revenues are earned.
A)True
B)False
Answer: True
Q3) Accounting adjustments fall into three basic categories: accruals, prepaids, and depreciation.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Internal Control Cash
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173 Flashcards
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Sample Questions
Q1) When approving an invoice for payment:
A) the receiving department should examine the payment packet to make sure all the documents agree.
B) after payment, the payment packet should be stamped "paid".
C) checks should be returned to the department who prepared them for mailing.
D) the person who ordered the goods should examine the payment package to make sure all the documents agree.
Q2) Which of the following items can be added or subtracted from the bank balance when preparing the bank reconciliation?
A) Service charges
B) Bank errors
C) Deposits in transit
D) Outstanding checks
Q3) Once the company receives the inventory, it prepares a(n) ________ to list the goods received.
A) invoice
B) purchase approval form
C) receiving report
D) EFT transfer
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Page 6
Chapter 5: Short-Term Investments Receivables
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201 Verified Questions
201 Flashcards
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Sample Questions
Q1) Accounts receivable are shown on the balance sheet at their net realizable value.
A)True
B)False
Q2) The aging-of-receivables method:
A) uses an income statement approach.
B) focuses on the amount of receivable that will not be collected.
C) can only be used by service companies.
D) will produce results similar to those under the direct write-off method.
Q3) Uncollectible-account expense is an operating expense on the income statement.
A)True
B)False
Q4) Kate Johnson, president of BQ Industries, executed a note payable on behalf of the company on October 1, 2012 in the amount of $125,000 with an interest rate of 8% for 15 months.
Calculate the following items:
1. The total interest to be paid over the term of the note
2. The interest that should be accrued at December 31, 2012 (the FYE)
3. The maturity value of the note when the note is due
4. The date that the note is due
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Chapter 6: Inventory Cost of Goods Sold
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Sample Questions
Q1) A LIFO ________ occurs when inventory quantities fall below the level of the previous period.
A) adjustment
B) failure
C) liquidation
D) materiality
Q2) The Army Store has an ending inventory of $630,000. The current replacement cost of the inventory is $608,000. Before any adjustments at the end of the period, the cost of goods sold account has a balance of $900,000.
Required:
1. What journal entry if any, should The Army Store make?
2. At what amount should The Army Store report inventory on its balance sheet?
3. At what amount should The Army Store report cost of goods sold on the income statement?
4. What accounting principle(s) is or are most relevant to this situation?
Q3) If a company's records are destroyed by fire, there is no way to determine the amount of the inventory that was destroyed.
A)True
B)False
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Page 8
Chapter 7: Plant Assets, Natural Resources, Intangibles
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211 Verified Questions
211 Flashcards
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Sample Questions
Q1) Which of the following is a correct statement regarding intangible assets?
A) The useful life of a patent can be longer than its legal life.
B) Patents protect computer software programs.
C) Franchises are granted by the federal government.
D) Intangibles with indefinite lives must be checked annually for any loss in value.
Q2) A purchaser is willing to pay for goodwill when they feel the company they are buying has abnormal earning power.
A)True
B)False
Q3) The cost of installing lights in the parking lot should be recorded as:
A) land.
B) land improvements.
C) building.
D) equipment.
Q4) The straight-line method must be used for computing depreciation for income tax purposes.
A)True
B)False
Q5) Determine the cost of the dump truck, based upon the following data:
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Chapter 8: Long-Term Investments the Time Value of Money
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189 Verified Questions
189 Flashcards
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Sample Questions
Q1) The balancing figure that brings the dollar amount of the total liabilities and stockholders' equity of the foreign subsidiary into agreement with the dollar amount of its total assets is the:
A) equity adjustment.
B) foreign-currency exchange rate.
C) foreign-currency translation adjustment.
D) foreign consolidation adjustment.
Q2) If the single amount of $5,000 is to be received in 3 years and discounted at 6%, its present value is:
A) $4,200.
B) $4,450.
C) $5,000.
D) $5,300.
Q3) An investee should report available-for-sale securities that might be sold in the next 12 months as a short-term investment.
A)True
B)False
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Page 10
Chapter 9: Liabilities
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Sample Questions
Q1) Bonds that mature at a single specified future date are called:
A) term bonds.
B) coupon bonds.
C) serial bonds.
D) debentures.
Q2) Earnings per share is the amount of a company's net income divided by the par value of its stock.
A)True
B)False
Q3) On January 1, Charlie Corporation issued $3,000,000, 14%, 5-year bonds with interest payable on January 1 and July 1. The bonds sold for $3,216,288. The market rate of interest for these bonds was 12%. Under the effective-interest method, the debit entry to interest expense on July 1 is for (rounded to the nearest dollar):
A) $180,000.
B) $188,237.
C) $192,978.
D) $210,000.
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) When a stock dividend is received, the stockholder would:
A) own more shares of stock.
B) anticipate the par value of the stock to increase.
C) expect the market price per share to increase.
D) expect retained earnings to decrease.
Q2) The price that the stockholder pays to acquire stock from the corporation is the:
A) par price.
B) authorized price.
C) offering price.
D) issue price.
Q3) When a company issues common stock greater than its par value, the excess should be credited to:
A) retained earnings.
B) common stock.
C) paid-in capital in excess of par.
D) capital.
Q4) Treasury stock is a contra-stockholders' equity account.
A)True
B)False
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Chapter
Income, the Statement of Stockholders Equity
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Sample Questions
Q1) A prior-period adjustment for overstated net income will be:
A) debited to the Retained Earnings account.
B) credited to the Retained Earnings account.
C) shown as a liability on the current year's Balance Sheet.
D) shown as a loss on the current year's Income Statement.
Q2) The amount of tax to pay the government in the next period is known as:
A) deferred tax asset.
B) deferred tax liability.
C) income tax expense.
D) income tax payable.
Q3) The gain or loss on the disposal of a business segment is shown on the income statement as:
A) an extraordinary item.
B) part of discontinued operations
C) part of income from operations.
D) other gains or losses.
Q4) Publicly traded companies have to file their financial statements with the IRS.
A)True
B)False
Page 13
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Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) An increase in Accounts Receivable during the reporting period indicates that cash collections from customers was less than credit sales on the income statement.
A)True
B)False
Q2) During the year, New Liberty Corporation's treasury stock increased $30,000 from a cash purchase, cash dividends paid totaled $44,000 and the company reported net income of $220.000. Net cash used by financing activities is:
A) $74,000.
B) $14,000.
C) $146,000.
D) $206,000.
Q3) Creditors analyze the statement of cash flows to determine:
A) total interest earned during the period.
B) the quality of the company's earnings.
C) whether or not the company can pay interest on debt.
D) if management was overpaid.
Q4) Operating income is typically equal to cash flow from operating activities.
A)True B)False
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) In the statement of cash flows, purchases of fixed assets are considered to be investing activities.
A)True
B)False
Q2) A company's debt ratio is computed as total assets minus total liabilities.
A)True
B)False
Q3) Which of the following combines the concepts of accounting income and corporate finance to measure whether the company's operations have increased stockholder wealth?
A) Gross profit margin
B) Earnings per share
C) Economic value added
D) Price/earnings ratio
Q4) Which of the following would be most helpful in the comparison of different size companies?
A) Horizontal analysis
B) Comparison of their net incomes
C) Comparison of their working capital balances
D) Preparation of common-size financial statements
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