Introduction to Business Accounting Test Preparation
Course Introduction
Introduction to Business Accounting provides students with a foundational understanding of accounting principles and their application in the business environment. The course covers essential topics such as the accounting cycle, preparation and interpretation of financial statements, bookkeeping procedures, and an overview of key financial concepts like assets, liabilities, equity, revenues, and expenses. Emphasis is placed on how accounting information supports decision-making within businesses, introducing students to ethical considerations and the regulatory environment. This course equips learners with practical skills to analyze financial data and understand its impact on business operations.
Recommended Textbook
Financial Accounting 11th Edition by
W. Steve Albrecht
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24 Chapters
2549 Verified Questions
2549 Flashcards
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Page 2
Chapter 1: Accounting Information: Users and Uses
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47 Verified Questions
47 Flashcards
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Sample Questions
Q1) Which of the following is NOT a function of accounting?
A) Accumulating economic information about organizations
B) Measuring economic information about organizations
C) Executing sales transactions for organizations
D) Communicating economic information about organizations
Answer: C
Q2) Ethics are especially important in accounting because
A) Independent accountants represent the public interest
B) Accountants can steal money more easily than other employees
C) Accountants have historically committed more company thefts than other employees
D) The accounting profession does not have a code of professional conduct
Answer: A
Q3) Which of the following is NOT a typical source of monetary resources for a business enterprise?
A) Investors
B) Creditors
C) Business earnings
D) Employees
Answer: D
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Chapter 2: Financial Statements: An Overview
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117 Flashcards
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Sample Questions
Q1) On January 1, 2013, Sorenson Company had a retained earnings balance of $780,000. During 2013, Sorenson Company earned a net income of $145,000. Cash dividends of $50,000 were paid during the year. Using this information, prepare a Statement of Retained Earnings, in good form, for the year 2013.
Answer: 11edc184_77ec_4542_a8cf_635d0f0abc8e_TB1384_00
Q2) Which of the following is an example of a nonoperating expense?
A) Salary expense
B) Interest expense
C) Cost of goods sold
D) Advertising expense
Answer: B
Q3) Economic resources that are owned or controlled by an enterprise are called
A) Assets
B) Liabilities
C) Revenues
D) Gains
Answer: A
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Chapter 3: The Accounting Cycle: The Mechanics of Accounting
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109 Flashcards
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Sample Questions
Q1) The basic accounting equation is
A) Assets = Liabilities + Owners' Equity
B) Assets + Owners' Equity = Liabilities
C) Assets + Liabilities = Owners' Equity
D) Liabilities - Owner's Equity = Assets
Answer: A
Q2) If a company purchased a building with a cash down payment and the balance with a loan, the accounting equation will show a(n)
A) Decrease in assets and increase in liabilities
B) Increase in assets and increase in liabilities
C) Increase in assets and decrease in liabilities
D) Decrease in assets and decrease in liabilities
Answer: B
Q3) Computers can NOT do which of the following?
A) Analyze transactions
B) Post journal entries
C) Summarize accounting data
D) Prepare a variety of reports
Answer: A
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Chapter 4: Completing the Accounting Cycle
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112 Flashcards
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Sample Questions
Q1) The notes to the financial statements tell all of the following EXCEPT
A) Details about specific items
B) Assumptions used by the company
C) Accounting methods used by the company
D) Financial analysis
Q2) Refer to Exhibit 4-2. Given the information above, the entry to close expenses would include a
A) Debit to Utilities expense of $42,000
B) Credit to Utilities expense of $42,000
C) Credit to Sales revenue of $630,000
D) Debit to Salaries expense of $483,000
Q3) Refer to Exhibit 4-1. Given the information above, what is the amount of total assets on Cajon Corporation's balance sheet in 2012?
A) $150
B) $300
C) $450
D) $650
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Chapter 5: Internal Controls: Ensuring the Integrity of Financial Information
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107 Flashcards
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Sample Questions
Q1) Using independent reviewers, such as auditors, is an example of which type of accounting procedure?
A) Physical control over records
B) Adequate documents and records
C) Proper procedures for authorization
D) Independent checks on performance
Q2) Which of the following categories of control activities is NOT considered a preventative control?
A) Independent checks on performance
B) Physical control over assets and records
C) Adequate segregation of duties
D) Proper procedures for authorization
Q3) Failure to record the used portion of supplies on hand during the month has the following effect on the financial statements prepared at the end of the month
A) Overstates liabilities
B) Understates net income
C) Overstates assets
D) Understates owner's equity
Q4) Discuss the three types of problems that can occur in financial statements.
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Chapter 6: Receivables: Selling a Product or a Service
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Sample Questions
Q1) Refer to Exhibit 6-2. Given the information above and assuming a 365-day business year, what was Seau's average collection period (rounded) during 2012?
A) 56 days
B) 53 days
C) 49 days
D) 41 days
Q2) The entry to record estimated service expenses related to sales would include a
A) Credit to Sales Revenue
B) Debit to Sales Revenue
C) Debit to Estimated Liability for Service
D) Credit to Estimated Liability for Service
Q3) Sales Returns and Allowances is which type of account?
A) Revenue
B) Contra-revenue
C) Expense
D) Contra-expense
Q4) List and describe the three most common cash controls that companies use to safeguard cash.
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Chapter 7: Inventory and the Cost of Sales
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148 Flashcards
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Sample Questions
Q1) Merchandise shipped FOB shipping point on the last day of the year should probably be included in
A) The buyer's inventory balance
B) The seller's inventory balance
C) Neither the buyer's nor seller's inventory balance
D) Both the buyer's and the seller's inventory balances
Q2) The inventory shrinkage account is
A) Used only with the perpetual inventory method
B) A permanent (real) account
C) A balance sheet account
D) Used only with the periodic inventory method
Q3) Which of the following accounts would be debited when making closing entries?
A) Cost of Goods Sold
B) Purchases
C) Sales Discounts
D) Purchase Returns
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Chapter 8: Completing the Operating Cycle
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Sample Questions
Q1) During the first week of January, Nathan Mills earned $800. Assume that FICA taxes are 7.65 percent of wages up to $50,000; state unemployment tax is 5.0 percent of wages up to $13,000; and federal unemployment tax is 0.8 percent of wages up to $13,000. Assume that Nathan has voluntary withholdings of $40 (in addition to taxes) and that federal and state income tax withholdings are $72 and $24, respectively. What is the employer's payroll tax expense for the week, assuming that Nathan Mills is the only employee?
A) $46.40
B) $107.60
C) $40.00
D) $101.20
Q2) The earnings from assets in a company's pension fund that are used to offset the cost of the pension plan is the A) Pension-related interest cost
B) Pension payment
C) Service cost
D) Return on pension fund assets
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Chapter 9: Investments: Property, Plant, and Equipment and Intangible Assets
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130 Flashcards
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Sample Questions
Q1) A truck that cost $19,200 and was expected to last 5 years was scrapped after 3 years. If the truck was being depreciated on a straight-line basis (with no salvage value), the loss recognized on disposal would be
A) $19,200
B) $7,680
C) $9,600
D) $11,520
Q2) The Suvari Company purchased a machine on November 1, 2003, for $148,000. At the time of acquisition, the machine was estimated to have a useful life of 10 years and a salvage value of $4,000. Suvari recorded monthly depreciation using the straight-line method. On July 1, 2012, the machine was sold for $13,000. What should be the loss recognized from the sale of the machine?
A) $4,000
B) $5,000
C) $10,200
D) $13,000
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11
Chapter 10: Financing: Long-Term Liabilities
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113 Flashcards
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Sample Questions
Q1) A $200,000 bond with a carrying value of $208,000 was called at 103 and retired. In recording the retirement, the issuing company should
A) Record no gain or loss
B) Record a $6,000 loss
C) Record a $8,000 gain
D) Record a $2,000 gain
Q2) Bonds usually sell at a premium when
A) Investors are willing to invest in the bonds at the stated interest rate
B) Investors are willing to invest in the bonds at rates that are lower than the stated interest rate
C) Investors are willing to invest in the bonds only at rates that are higher than the stated interest rate
D) The bond issuer expects a capital gain
Q3) The effective-interest method of amortizing bond premiums
A) Is too complicated for practical use
B) Recognizes the time value of money
C) Is another name for the straight-line method
D) Is needed to determine the amount of cash to be paid to bondholders at each interest date
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Page 12
Chapter 11: Financing: Equity
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86 Flashcards
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Sample Questions
Q1) The purpose of a statement of stockholders' equity is to
A) Report the balances in the stockholders' equity accounts as of a particular date
B) Reconcile beginning and ending balances of all stockholders' equity accounts reported on the balance sheet
C) Report changes in all stockholders' equity accounts except Retained Earnings
D) Summarize treasury stock transactions for a period of time
Q2) Which of the following is a basic right of a preferred stockholder?
A) The right to vote for the board of directors
B) The preemptive right
C) The right to receive a dividend
D) The right to excess assets after creditor claims are satisfied
Q3) Unrealized gains and losses on available-for-sale securities are reported in the A) Gains and losses section of the income statement
B) Equity section of the balance sheet
C) Extraordinary items section of the income statement
D) Investments section of the balance sheet
Q4) Identify the three types of organizations and list the characteristics of each one.
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13
Chapter 12: Investments: Debt and Equity Securities
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Sample Questions
Q1) Refer to Exhibit 12-1. Given the information above, on August 26, Augsburg should
A) Credit Investment in Trading Securities for $22,000
B) Credit Realized Gain on Sale of Securities for $1,600
C) Credit Realized Gain on Sale of Securities for $1,200
D) Debit Dividend Revenue for $23,600
Q2) On January 5, 2012, Gannon Corporation purchased 100 shares of Hedney Company stock at $12 per share and paid a $50 brokerage commission. Gannon classified the shares as available-for-sale securities. On May 31, 2012, the entry to record the receipt of the 60-cent-per-share dividend would include a credit to
A) Dividend Revenue for $100
B) Long-Term Investments for $60
C) Dividend Revenue for $60
D) Long-Term Investments for $100
Q3) Consolidated financial statements are typically prepared when one company has A) Accounted for its investment in another company by the equity method
B) Significant influence over the operating and financial policies of another company
C) The controlling financial interest in another company
D) A substantial equity interest in the net assets of another company
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) The exchange of debt for equipment would
A) Be shown on a statement of cash flows as an operating activity
B) Be shown on a statement of cash flows as an investing activity
C) Be shown on a statement of cash flows as a financing activity
D) Be shown as a supplementary disclosure
Q2) A gain on the sale of machinery in the ordinary course of business should be presented in a statement of cash flows (indirect method) as
A) A deduction from net income
B) An addition to net income
C) An inflow and outflow of cash
D) An outflow of cash
Q3) Which of the following items would be reported on a statement of cash flows prepared by the indirect method but NOT by the direct method?
A) Depreciation expense
B) Cash received from the sale of a building
C) Cash received from issuance of stock
D) Cash paid for dividends
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15
Chapter 14: Analyzing Financial Statements
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Sample Questions
Q1) Refer to Exhibit 14-7. Compute the cash flow adequacy ratio.
A) 2.57
B) 4.09
C) 16.36
D) 2.12
Q2) When analyzing financial statements, prognosis is
A) The prediction of how a business will perform in the future
B) The identification of the trends in past numbers
C) The prediction of how many employees will lose their jobs in the coming year
D) The identification of where a business has problems
Q3) Refer to Exhibit 14-5. Using the information above, calculate Frederick's average collection period (round to two decimal places).
A) 99.46 days
B) 27.26 days
C) 42.25 days
D) 5.45 days
Q4) List five efficiency ratios and write out the equation for each one.
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Page 16
Chapter 15: Management Accounting and Cost Concepts
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102 Flashcards
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Sample Questions
Q1) Which of the following is NOT a function of management?
A) Planning
B) Controlling
C) Analyzing
D) Regulating
Q2) Which is usually conducted by executive level management?
A) Evaluating
B) Strategic planning
C) Operational budgeting
D) Controlling
Q3) Future costs that change as a result of a decision are:
A) Direct costs
B) Differential costs
C) Out-of-pocket costs
D) Common costs
Q4) Which of the following is NOT used in the evaluation of a business segment?
A) Variable costs
B) Opportunity costs
C) Sunk costs
D) Direct costs
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Chapter 16: Cost Flows and Business Organizations
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Sample Questions
Q1) Refer to Exhibit 16-2. Given the information above, if manufacturing overhead is applied at the rate of $4.50 per direct labor hour, overhead for August is:
A) $1,500 overapplied
B) $2,000 overapplied
C) $1,500 underapplied
D) $2,000 underapplied
Q2) Most product distribution to consumers follows which of the following channels?
A) Manufacturer to end user
B) Manufacturer to retailer to end user
C) Manufacturer to wholesaler to retailer to end user
D) Manufacturer to wholesaler to end user
Q3) The order of cost flow through the accounts in a manufacturing firm is:
A) Raw Materials, Work-in-Process, Cost of Goods Sold, Finished Goods
B) Raw Materials, Work-in-Process, Finished Goods, Cost of Goods Sold
C) Raw Materials, Finished Goods, Work-in-Process, Cost of Goods Sold
D) Work-in-Process, Raw Materials, Finished Goods, Cost of Goods Sold
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18
Chapter 17: Activity-Based Costing
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Sample Questions
Q1) If a cost activity does NOT have any production-related cost driver that matches up with changes in the amount of overhead cost associated with the activity then:
A) Any basis can be selected as a cost driver
B) Direct labor hours should be used as the cost driver
C) No cost driver should be selected; the costs should be treated as common costs
D) Number of items produced should be the cost driver.
Q2) Refer to Exhibit 17-4. The total manufacturing cost per tent is:
A) $128
B) $140
C) $255
D) $268
Q3) Refer to Exhibit 17-2. What is BigView's cost per cost driver for automated processing for next year (rounded)?
A) $9.00 per machine hour
B) $16.80 per machine hour
C) $17.68 per machine hour
D) $33.60 per machine hour
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Chapter 18: Budgeting and Control
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Sample Questions
Q1) Which of the following would NOT be in the selling and administrative budget?
A) Office supplies
B) Sales commissions
C) Depreciation on factory building
D) Advertising expense
Q2) Refer to Exhibit 18-5. Given the information above, total service cost per patient served in January would be:
A) $79.50
B) $69.50
C) $62.50
D) $57.00
Q3) In preparing the master budget, which of the following is created first?
A) Direct materials budget
B) Production budget
C) Sales budget
D) Pro-forma statements
Q4) Describe the differences between authoritative budgeting and participative budgeting. Include advantages of each type of budgeting.
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Chapter 19: Controlling Cost and Profit
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Sample Questions
Q1) Which of the following is NOT a benefit of decentralization?
A) More timely decisions can be made
B) Lower-level managers become more involved in strategic planning
C) Managers can be evaluated more accurately
D) Sub-unit managers have incentives to perform well
Q2) All favorable labor rate variances indicate that:
A) The actual labor rate is less than the standard labor rate
B) The actual labor rate is greater than the standard labor rate
C) Actual hours were greater than standard hours
D) Standard hours were greater than actual hours
Q3) Refer to Exhibit 19-1. Given the information above, the materials price variance is:
A) $8,800 unfavorable
B) $8,800 favorable
C) $24,000 unfavorable
D) $24,000 favorable
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Chapter
20: Inventory Management and Variable and
Absorption Costing
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Sample Questions
Q1) Inventory shrinkage is caused by:
A) Spoilage
B) Theft
C) Breakage
D) All of these are correct
Q2) Which of the following is the income statement formula for the absorption costing method?
A) Sales Revenue - Cost of Goods Sold = Gross Margin - All Fixed Expenses = Operating Income
B) Sales Revenue - All Variable Costs = Contribution Margin - All Fixed Expenses = Operating Income
C) Sales Revenue - Variable Manufacturing Costs = Contribution Margin - Fixed Manufacturing Costs = Operating Income
D) Sales Revenue - Cost of Goods Sold = Gross Margin - Selling and Administrative Expenses = Operating Income
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22
Chapter 21: Cost Behavior and Decisions Using C-V-P Analysis
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Sample Questions
Q1) A firm's per-unit contribution margin is $30, its fixed costs are $67,500, and its daily production output is 18 units. How many days will it take to break even after it is in operation?
A) 100 days
B) 125 days
C) 139 days
D) 155 days
Q2) Refer to Exhibit 21-6. In the graph above, total fixed costs are represented by:
A) Line A
B) Line B
C) Area C
D) Area D
Q3) Fixed costs per unit:
A) Remain constant as activity levels increase
B) Increase as activity levels increase
C) Decrease as activity levels increase
D) None of these are correct
Q4) Last month CMC Corporation had to sell 6,000 units to reach the break- even point. The selling price was $225 per unit and variable costs were $85.50 per unit. What were fixed costs for the month?
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Chapter 22: Relevant Information and Decisions
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Sample Questions
Q1) A company should generally add a product line if:
A) Its segment margin is negative and its contribution to overall company profits is negative
B) Its segment margin is negative and its contribution to overall company profits is positive
C) Its segment margin is positive
D) None of these are correct
Q2) Which of the following statements about opportunity costs is true?
A) They are not recorded in the accounts and thus are not useful in the decision-making process
B) They are not recorded in the accounts but are useful in the decision-making process
C) They are recorded in the accounts but are not useful in the decision-making process
D) They are recorded in the accounts and are useful in the decision-making process
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Chapter 23: Capital Investment Decisions
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Sample Questions
Q1) Which of the following capital budgeting methods considers the time value of money?
A) Internal rate of return method
B) Net present value method
C) Unadjusted rate of return
D) Both the internal rate of return method and the net present value method
Q2) If the tax rate is 40% and a company has $200,000 of pre-tax income, a depreciation deduction of $40,000 would result in a tax savings of:
A) $13,600
B) $16,000
C) $24,000
D) $26,400
Q3) Which method is preferred for capital rationing?
A) Internal rate of return method
B) Payback method
C) Net present value method
D) Both internal rate of return method and net present value method
Q4) List 10 qualitative factors that could be taken into account when making capital budgeting decisions.
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Chapter 24: New Measures of Performance
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Sample Questions
Q1) An example of an outcome performance measure is:
A) Percentage of on-time deliveries
B) Retaining current customers
C) Purchase cost to the customer
D) Production cycle time
Q2) Costs incurred to train production employees are:
A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs
Q3) Which of the following is NOT part of the Balanced Scorecard Framework?
A) "How do we appear to shareholders?"
B) "How will we sustain change and progress?"
C) "What business processes must we excel at?"
D) "What is our current market share?"
Q4) An example of an operations process measure is:
A) Customer requests handled on first call
B) Modifications required per design
C) Six sigma quality
D) Costs per customer service incident
Page 26
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