Basic Accounting Review Questions
Course Introduction
Basic Accounting introduces students to the fundamental principles and concepts of accounting, providing a solid foundation for understanding how financial information is recorded, classified, and summarized. Topics include the accounting cycle, preparation of financial statements, double-entry bookkeeping, and the role of accounting in business decision-making. Through practical examples and exercises, students learn to analyze transactions, use journals and ledgers, and interpret basic financial reports, equipping them with essential skills for further studies in accounting and finance.
Recommended Textbook
Fundamental Financial Accounting Concepts 10th Edition by Thomas P Edmonds
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13 Chapters
1246 Verified Questions
1246 Flashcards
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Page 2
Chapter 1: An Introduction to Accounting
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Sample Questions
Q1) Which of the following would be reported in the cash flow from financing activities section of a statement of cash flows?
A)Paid cash for dividends
B)Received cash for common stock
C)Sold land for cash
D)Paying cash for dividends and receiving cash from common stock
Answer: D
Q2) What is the amount of total assets that will be reported on Lexington's balance sheet at the end of Year 1?
A)$11,000
B)$12,000
C)$1,600
D)$7,600
Answer: A
Q3) Borrowing money from the bank is an example of an asset source transaction.
A)True
B)False
Answer: True
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3
Chapter 2: Accounting for Accruals and Deferrals
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Sample Questions
Q1) Chester Company began Year 2 with a note payable of $20,000 and an interest payable of $800.During the year,the company accrued an additional $400 of interest expense,and paid off the note with interest.What is the amount of cash flows for financing activities that will be reported on the statement of cash flows as a result of these transactions?
A)$1,200 outflow
B)$20,000 outflow
C)$20,400 outflow
D)$21,200 outflow
Answer: B
Q2) Providing services to customers on account is an asset exchange transaction. A)True
B)False Answer: False
Q3) Asset use transactions always involve the payment of cash.
A)True
B)False
Answer: False
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4
Chapter 3: The Double-Entry Accounting System
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) What is the term used to describe the left side of a T-account?
A)Equity Side
B)Debit Side
C)Credit Side
D)Claims Side Answer: B
Q2) Debits decrease asset accounts.
A)True
B)False
Answer: False
Q3) The adjusting entry to record expense related to the use of a delivery van would involve which of the following?
A)A debit to Accumulated Depreciation
B)A credit to Delivery Van
C)A debit to Depreciation Expense
D)A debit to Retained Earnings
Answer: C
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5
Chapter 4: Accounting for Merchandising Businesses
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) If a company uses the periodic inventory system,it records inventory purchases in the Purchases account at the time of purchase.
A)True
B)False
Q2) Middleton Company uses the perpetual inventory system.The company purchased an item of inventory for $130 and sold the item to a customer for $200.How will the sale affect the company's Inventory account?
A)The Inventory account will decrease by $200.
B)The Inventory account will decrease by $130.
C)The Inventory account will decrease by $70.
D)The Inventory account will not change.
Q3) Exeter Company sold merchandise for $10,000 cash.The merchandise had cost the company $4,500.What is the effect of the sale on the balance sheet?
A)Cash increases by $10,000.
B)Inventory decreases by $4,500.
C)Retained earnings Increases by $5,500.
D)All of these answer choices are correct.
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Chapter 5: Accounting for Inventories
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Sample Questions
Q1) At the end of the Year 2 accounting period,DeYoung Company determined that the market value of its inventory was $79,800.The historical cost of this inventory was $81,400.DeFazio uses the perpetual inventory method.Assuming the amount is material,how will the entry necessary to reduce the inventory to the lower of cost or market affect the elements of the company's financial statements?
A)Decrease total assets and gross margin
B)Decrease total assets and net income
C)Increase total assets and net income
D)Decrease total assets,gross margin,and net income
Q2) One of the disadvantages of the specific identification inventory cost flow method is that it can allow managers of a business to manipulate the amount of income the business reports.
A)True B)False
Q3) If Singleton uses the FIFO cost flow method,its cost of goods sold would be $4,490.
A)True B)False
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Chapter 6: Internal Control and Accounting for Cash
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Sample Questions
Q1) A business learns about customers' NSF checks through debit memos that are included with the bank statement.
A)True
B)False
Q2) Which of the following is not a motive for the embezzlement of cash by employees?
A)Cash is the common unit of measurement
B)Ownership of cash is difficult to prove
C)Cash has universal appeal
D)Small quantities of high-denomination currency can represent significant value
Q3) A savings account or certificate of deposit that imposes a substantial penalty for early withdrawals should not be classified as Cash on the balance sheet.
A)True
B)False
Q4) Which of the following is not a common feature of an internal control system?
A)Segregating duties
B)Performance evaluation
C)Bonding employees
D)Implementing the most effective marketing plan
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8
Chapter 7: Accounting for Receivables
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Sample Questions
Q1) The balance in Accounts Receivable at the beginning of the year amounted to $16,000.During the year,$64,000 of credit sales were made to customers.If the ending balance in Accounts Receivable amounted to $10,000,and uncollectible accounts expense amounted to $4,000,what is the amount of cash inflow from customers that would appear in the operating activities section of the cash flow statement?
A)$66,000.
B)$64,000.
C)$80,000.
D)None of these answers are correct.
Q2) When a company accepts a credit card payment for a sale,the amount of sales revenue to be recorded is reduced by the amount of the credit card company's fee.
A)True
B)False
Q3) If a company estimates uncollectible accounts based on a percentage of receivables,the resulting estimate will be presented on the balance sheet as the ending balance in Allowance for Doubtful Accounts.
A)True
B)False
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9
Chapter 8: Accounting for Long-Term Operational Assets
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Sample Questions
Q1) Which of the following terms is used to describe long-term assets that have no physical substance and provide rights,privileges and special opportunities to businesses?
A)Tangible assets
B)Intangible assets
C)Natural resources
D)Property,plant and equipment
Q2) Gillock,Inc.uses MACRS for its income tax return and the straight-line method for its financial statements.On January 1,Year 1,the company purchased a long-term asset that cost $130,000 and has a $10,000 salvage value and an expected 8-year useful life.MACRS specifies a 5-year life for that asset and a depreciation rate of 20% for the first year of its life.Which of the following would the company show on its financial records?
A)Less depreciation expense on the tax return than on the income statement
B)The same amount of depreciation expense for financial reporting as for income tax preparation
C)Depreciation expense of $26,000 on the income statement and $15,000 on the tax return
D)A deferred tax liability will be reported on the balance sheet
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Page 10
Chapter 9: Accounting for Current Liabilities and Payroll
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Sample Questions
Q1) Based on this information alone,what is the amount of cash flow from operating activities reported on Madison's Year 1 statement of cash flows?
A)$1,920
B)$800
C)$24,000
D)$-0-
Q2) Which of the following represents the correct journal entry to record a taxable cash sale of $400 if the sales tax rate is 5%?
A)A debit to cash for $420,a debit to sales tax expense for $20,and a credit to sales revenue for $400.
B)A debit to cash for $400,a credit to sales tax payable for $20,and a credit to sales revenue for $380.
C)A debit to cash for $420,a credit to sales tax payable for $20,and a credit to sales revenue for $400.
D)None of these answer choices are correct.
Q3) The issuer of a note payable is also known as the maker.
A)True
B)False
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11
Chapter 10: Accounting for Long-Term Debt
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105 Flashcards
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Sample Questions
Q1) The times-interest-earned ratio is calculated by which of the following?
A)Total assets divided by interest expense.
B)Net income divided by interest expense.
C)Earnings before interest and taxes divided by interest expense.
D)None of these answer choices are correct.
Q2) What is the amount of principal repayment included in the payment made on December 31,Year 1?
A)$20,000.00
B)$8,000.00
C)$25,045.65
D)$17,045.65
Q3) If a company chooses to call some of its callable bonds before their maturity,generally it will have to pay an amount that is greater than the carrying value of the bonds.
A)True
B)False
Q4) For a long-term note payable,repaying a portion of principal along with interest payments is called loan amortization.
A)True
B)False
Page 12
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Chapter 11: Proprietorships,partnerships,and Corporations
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Sample Questions
Q1) Ogilvie Corp.issued 12,000 shares of no-par stock for $40 per share.Ogilvie was authorized to issue 35,000 shares.What effect will this event have on the elements of the company's financial statements?
A)Increase assets and increase stockholders' equity by $1,400,000.
B)Increase assets and increase stockholders' equity by $480,000.
C)Increase cash inflows from investing activities by $480,000.
D)None of these answer choices are correct.
Q2) Which of the following statements is a reason why a company would buy treasury stock?
A)Because management believes the market price of the stock is undervalued.
B)To have stock available to issue to employees in stock option plans.
C)To avoid a hostile takeover.
D)All of these are reasons a company would buy treasury stock.
Q3) Weller Corporation issued 10,000 shares of no-par common stock for $25 per share.For this transaction,Common Stock should be credited (increased)for $250,000.
A)True B)False
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Page 13
Chapter 12: Statement of Cash Flows
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Sample Questions
Q1) How would the issuance of a mortgage note in exchange for a building be reported on the statement of cash flows?
A)Financing activity
B)Investing activity
C)Operating activity
D)Noncash financing and investing activity
Q2) The FASB requires that companies report cash flow per share in their audited financial statements.
A)True
B)False
Q3) During Year 1,Mallard Company earned $165,000 of sales revenue on account and accrued $122,500 of operating expenses.The company also earned $26,400 of service revenue that had previously been recorded as unearned revenue.In addition,a $2,200 stock dividend was issued to the stockholders.What can be said about cash flows considering these transactions?
A)Cash outflows from financing activities are $2,200.
B)Cash inflows from operating activities are $68,900.
C)Cash inflows from operating activities are $42,500.
D)There are no cash inflows or outflows as a result of these activities.
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Page 14
Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Jenkins Company's current ratio is higher than the average for its industry,while its quick ratio is below the industry average.One possible interpretation for these results is that Jenkins carries less inventory than most companies in its industry.
A)True
B)False
Q2) When debt is used to finance the purchase of assets,the term or time span of the debt should always be shorter than the lifespan of the assets.
A)True
B)False
Q3) Which of the following statements regarding the return on equity (ROE)measure is not true?
A)ROE is used to measure the profitability of the firm in relation to the amount invested by stockholders.
B)ROE equals net income divided by average total stockholders' equity.
C)ROE is affected by a company's use of leverage.
D)A company's ROE is lower than its return on investment because ROE does not consider that part of the business that is financed by debt.
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