Principles of Accounting Solved Exam Questions
Course Introduction
Principles of Accounting is an introductory course that explores the fundamental concepts and techniques vital to understanding financial and managerial accounting. Students learn how to record, classify, and summarize financial transactions, prepare and interpret basic financial statements, and apply accounting principles to decision-making processes in businesses. The course emphasizes the accounting cycle, double-entry bookkeeping, accruals and deferrals, and the ethical standards governing the accounting profession. By the end of the course, students develop a solid foundation to analyze financial information and apply it within various organizational contexts.
Recommended Textbook
Corporate Financial Accounting 13th Edition by Carl Warren
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Page 2
Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) The year-end balance of the retained earnings account appears in
A)both the retained earnings statement and the income statement
B)only the retained earnings statement
C)both the retained earnings statement and the balance sheet
D)both the retained earnings statement and the statement of cash flows
Answer: C
Q2) Which of the following is a service business?
A)Microsoft
B)Dell Computers
C)Facebook
D)Walmart
Answer: C
Q3) Discuss the characteristics of a limited liability company LLC.
Answer: A limited liability company LLC combines the attributes of a partnership and a corporation.It is often used as an alternative to a partnership because it has tax and legal liability advantages for owners.
Q4) About 90% of the businesses in the United States are organized as corporations.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Analyzing Transactions
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Sample Questions
Q1) Which of the following is not a correct rule of debits and credits?
A)Assets,expenses,and dividends are increased by debits.
B)Assets are decreased by credits and have a normal debit balance.
C)Liabilities,revenues,and stockholders' equity are increased by credits.
D)The normal balance for revenues and expenses is a credit.
Answer: D
Q2) A proof of the equality of debits and credits in the ledger at the end of an accounting period is called a balance sheet.
A)True
B)False
Answer: False
Q3) On January 12,JumpStart Co.purchased $870 in office supplies.
a. Journalize this transaction as if JumpStart paid cash.
b. 1 Journalize this transaction as if JumpStart placed it on account.
b. 2 On January 18,JumpStart pays the amount due.Journalize this event.
Answer: 11ed70a2_f62c_d715_8264_416623a50b58_TB6236_11
Q4) A transaction that is recorded in the journal is called a journal entry.
A)True
B)False
Answer: True
Page 4
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) For each of the following, journalize the necessary adjusting entry:
a. A business pays weekly salaries of $22,000 on Friday for a five-day week ending on that day. Journalize the necessary adjusting entry at the end of the fiscal period, assuming that the fiscal period ends 1 on Tuesday, 2 on Wednesday.
b. The balance in the prepaid insurance account before adjustment at the end of the year is $18,000. Journalize the adjusting entry required under each of the following alternatives: 1 the amount of insurance expired during the year is $5,300, 2 the amount of unexpired insurance applicable to a future period is $2,700.
c. On July 1 of the current year, a business pays $54,000 to the city for license taxes for the coming fiscal year. The same business is also required to pay an annual property tax at the end of the year. The estimated amount of the current year's property tax allocated to July is $4,800. 1 Journalize the two adjusting entries required to bring the accounts affected by the taxes up to date as of July 31. 2 What is the amount of tax expense for July?
d. The estimated depreciation on equipment for the year is $32,000.
Answer: 11ed70a7_9e5d_7e57_8264_611dab696c8b_TB6236_11
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) The closing process is sometimes referred to as closing the books.
A)True
B)False
Q2) Cash and other assets that may reasonably be expected to be realized in cash,sold,or consumed through the normal operations of a business,usually longer than one year,are called current assets.
A)True
B)False
Q3) Diane's Designs purchased a one-year liability insurance policy on March 1 of this year for $8,400 and recorded it as a prepaid expense.Which of the following amounts would be recorded for insurance expense during the adjusting process at the end of Diane's first month of operations on March 31?
A)$8,400
B)$840
C)$700
D)$7,700
Q4) The dividends account is a temporary account.
A)True
B)False
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Chapter 5: Accounting for Merchandising Businesses
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Sample Questions
Q1) Using a perpetual inventory system,the entry to record the return from a customer of merchandise sold on account includes a
A)credit to Customer Refunds Payable
B)debit to Merchandise Inventory
C)credit to Merchandise Inventory
D)debit to Cash
Q2) Cost of merchandise sold is often the largest expense on a merchandising company income statement.
A)True
B)False
Q3) Merchandise Inventory normally has a debit balance.
A)True
B)False
Q4) In a periodic inventory system,the cost of merchandise purchased includes the cost of freight-in.
A)True
B)False
Q5) Gross profit minus selling expenses equals net income.
A)True
B)False
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Chapter 6: Inventories
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Sample Questions
Q1) Three identical units of merchandise were purchased during July,as follows:
\(\begin{array}{|c|c|c|r|}
\hline {\text { Date }} & \text { Product Basic H } & \text { Units } & \text { Cost } \\
\hline \text { July } 3 & \text { Purchase } & 1 & \$ 35 \\
\hline 10 & \text { Purchase } & 1 & 36 \\
\hline 24& \text { Purchase } & \underline{1} & \underline { 37 }\\
\hline & \text { Total } & \underline{3} & \underline { \$ 108 }\\
\hline\\
\hline & \text { Average cost per unit }&&\underline { \$36 } \\ \hline
\end{array}\)
Assume one unit sells on July 28 for $45.
Determine the gross profit,cost of merchandise sold,and ending inventory on July 31 using a first-in,first-out,b last-in,first-out,and c average cost flow methods.
Q2) A physical inventory should be taken at the end of every month.
A)True
B)False
Q3) List three different security measures taken to safeguard inventory.
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8
Chapter 7: Sarbanes-Oxley,internal Control,and Cash
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Sample Questions
Q1) The actual cash received during the week ended June 7 for cash sales was $18,632,and the amount indicated by the cash register total was $18,628.Journalize the entry to record the cash receipts and cash sales. \(\begin{array}{|c|c|c|c|r|}
\hline \text { Date } & {\text { Description }} & \begin{array}{c}
\text { Post. } \\ \text { Ref. }
\end{array} & \text { Debit } & \text { Credit } \\ \hline \\
\hline &\\
\hline & \\ \hline \end{array}\)
Q2) A business that requires all cash payments be made by check can not use a petty cash system.
A)True
B)False
Q3) Expenditures from a petty cash fund are documented by a petty cash receipt.
A)True
B)False
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Chapter 8: Receivables
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Sample Questions
Q1) A note receivable due in 18 months is listed on the balance sheet under the caption
A)long-term liabilities
B)fixed assets
C)current assets
D)investments
Q2) The allowance method of estimating uncollectible accounts receivable based on an analysis of receivables shows that $640 of accounts receivables are uncollectible.The Allowance for Doubtful Accounts has a debit balance of $110.The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of:
A)$110
B)$640
C)$530
D)$750
Q3) When using the analysis of receivables method for estimating uncollectible receivables,the amount computed in the analysis is usually the amount that would be recorded in the end-of-period adjusting entry.
A)True
B)False
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10
Chapter 9: Fixed Assets and Intangible Assets
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Sample Questions
Q1) A capitalized asset will appear on the balance sheet as a long-term asset.
A)True
B)False
Q2) It is necessary for a company to use the same depreciation method for all of its depreciable assets.
A)True
B)False
Q3) Though a piece of equipment is still being used,the equipment should be removed from the accounts if it has been fully depreciated.
A)True
B)False
Q4) Sands Company purchased mining rights for $500,000.They expect to harvest 1 million tons of ore over the next five years.During the current year,Sands mined 350,000 tons of ore.The entry to record the depletion would include
A)a credit to Accumulated Depletion for $350,000
B)a debit to Accumulated Depletion for $175,000
C)a debit to Depletion Expense for $175,000
D)a credit to Depletion Expense for $350,000
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Chapter 10: Current Liabilities and Payroll
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Sample Questions
Q1) The amount borrowed is equal to the face amount of the note on an interest bearing note payable.
A)True B)False
Q2) Depending upon when an unfunded pension liability is to be paid,it will be classified on the balance sheet as either a long-term or a current liability.
A)True
B)False
Q3) The journal entry used to record the issuance of an interest-bearing note for the purpose of borrowing funds for the business is
A)debit Accounts Payable; credit Notes Payable
B)debit Cash; credit Notes Payable
C)debit Notes Payable; credit Cash
D)debit Cash and Interest Expense; credit Notes Payable
Q4) Obligations that may arise from past transactions only if certain events occur in the future are contingent liabilities.
A)True
B)False
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Chapter 11: Corporations: Organization,stock
Transactions,and Dividends
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Sample Questions
Q1) Organizational expenses are classified as intangible assets on the balance sheet. A)True
B)False
Q2) While some businesses have been granted charters under state laws,most businesses receive their charters under federal laws.
A)True
B)False
Q3) The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to
A)decrease total liabilities and stockholders' equity
B)increase total expenses and total liabilities
C)increase total assets and stockholders' equity
D)decrease total assets and stockholders' equity
Q4) The balance in Retained Earnings should be interpreted as representing surplus cash left over for dividends.
A)True
B)False
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Chapter 12: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) When the market rate of interest was 12%,Halprin Corporation issued $1,000,000,11%,10-year bonds that pay interest annually.The selling price of this bond issue was
A)$321,970
B)$1,000,000
C)$943,494
D)$621,524
Q2) A bond is usually divided into a number of individual bonds of $500 each.
A)True
B)False
Q3) The Designer Company issued 10-year bonds on January 1.The 6% bonds have a face value of $800,000 and pay interest every January 1 and July 1.The bonds were sold for $690,960 based on the market interest rate of 8%.Designer uses the effective interest method to amortize bond discounts and premiums.On July 1,of the first year,Designer should record interest expense round to the nearest dollar of
A)$27,638
B)$24,000
C)$48,000
D)$55,277
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Page 14
Chapter 13: Investments and Fair Value Accounting
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Sample Questions
Q1) During the first year of operations,Makala Company purchased two available-for-sale investments as follows:
\(\begin{array}{|l|c|c|}
\hline \text { Security } & \text { Shares Purchased } & \text { Cost } \\
\hline \text { Oceanna Company } & 700 & \$ 29,000 \\
\hline \text { Rockledge, Inc. } & 1,900 & 41,000 \\
\hline \end{array}\)
Assume that as of December 31,the Oceanna Company stock had a market value of $49 per share and Rockledge,Inc.stock had a market value of $20 per share.Makala had 10,000 shares of no par stock outstanding that was issued for $150,000.For the year ending December 31,Makala had a net income of $105,000.No dividends were paid.
a. Prepare the current assets section of the balance sheet presentation for the available-for sale securities as of December 31.
b. Prepare the stockholders' equity section of the balance sheet as of December 31.
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) The declaration and issuance of a stock dividend would be reported on the statement of cash flows.
A)True B)False
Q2) Cash flows from investing activities,as part of the statement of cash flows,would include any payments for the purchase of treasury stock.
A)True B)False
Q3) Income tax was $175,000 for the year.Income tax payable was $30,000 and $40,000 at the beginning and end of the year,respectively.Cash payments for income tax reported on the statement of cash flows using the direct method is
A)$175,000
B)$165,000
C)$205,000
D)$215,000
Q4) Sales reported on the income statement were $690,000.The accounts receivable balance declined $39,000 over the year.Determine the amount of cash received from customers.
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16
Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) If net income is $150,000 and interest expense is $20,000 for Year 2,what is the rate earned on total assets for the year?
A)10.4%
B)11.9%
C)10.5%
D)8.4%
Q2) When computing the rate earned on total common stockholders' equity,preferred stock dividends are subtracted from net income.
A)True
B)False
Q3) The current ratio is
A)used to evaluate a company's liquidity and short-term debt paying ability
B)a solvency measure that indicates the margin of safety of a bondholder
C)calculated by dividing current liabilities by current assets
D)calculated by subtracting current liabilities from current assets
Q4) Earnings per share amounts are only required to be presented for income from continuing operations and net income on the face of the statement.
A)True
B)False
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