Survey of Accounting Exam Bank
Course Introduction
Survey of Accounting provides students with a comprehensive introduction to fundamental accounting principles and practices used in business. The course covers essential topics such as basic financial statement preparation and analysis, the accounting cycle, and the role of accounting in decision-making. Students gain familiarity with both financial and managerial accounting concepts, developing an understanding of how accounting information is used by external stakeholders and internal managers to assess organizational performance and guide business decisions. The class is designed for non-accounting majors and emphasizes practical applications, ethical considerations, and the interpretation of accounting data in day-to-day business contexts.
Recommended Textbook
Financial Accounting Fundamentals 6th Edition by John J Wild
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Page 2
Chapter 1: Accounting in Business
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Sample Questions
Q1) A company reported total equity of $145,000 at the beginning of the year.The company reported $210,000 in revenues and $165,000 in expenses for the year.There were no stockholder investments or dividends during the year.Liabilities at the end of the year totaled $92,000.What are the total assets of the company at the end of the year?
A) $45,000.
B) $92,000.
C) $98,000.
D) $210,000.
E) $282,000.
Answer: E
Q2) Billington Corp.borrows $80,000 cash from Second National Bank.How does this transaction affect the accounting equation for Billington?
A) Assets would decrease $80,000 and liabilities would decrease $80,000.
B) Assets would decrease $80,000 and equity would increase $80,000.
C) Assets would increase $80,000 and equity would decrease $80,000.
D) Assets would increase $80,000 and liabilities would increase $80,000.
E) Liabilities would decrease $80,000 and equity would increase $80,000.
Answer: D
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Chapter 2: Analyzing for Business Transactions
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Q1) A business's record of the increases and decreases in a specific asset,liability,equity,revenue,or expense is known as a(n):
A) Journal.
B) Posting.
C) Trial balance.
D) Account.
E) Chart of accounts.
Answer: D
Q2) Describe the link between a business's income statement,the statement of retained earnings,and the balance sheet.
Answer: The income statement shows the amount of net income the company has earned.That income is carried to the statement of retained earnings.The net income is added to the beginning retained earnings balance,and dividends are subtracted to determine the ending retained earnings.The ending retained earnings is then carried to the balance sheet.
Q3) Revenues and expenses are two categories of ________ accounts. Answer: equity
Q4) You increase the Service Revenue account on the ________side of its account. Answer: right or credit
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Chapter 3: Adjusting Accounts for Financial Statements
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Q1) Wages Payable A)G
G)E Answer: G
Q2) Reversing entries are optional.
A)True
B)False Answer: True
Q3) On a work sheet,if the Debit total exceeds the Credit total of the Income Statement columns,a net loss is indicated.
A)True
B)False Answer: True
Q4) Profit margin = ________ divided by net sales. Answer: Net Income
Page 5
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Chapter 4: Accounting for Merchandising Operations
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Q1) A ________company's operating cycle begins with the purchase of merchandise and ends with the collection of cash from merchandise sales.
Q2) A perpetual inventory system is able to directly measure and monitor inventory shrinkage and there is no need for a physical count of inventory.
A)True
B)False
Q3) Merchandise inventory refers to products that a company owns and intends to sell to customers.
A)True
B)False
Q4) Distinguish between selling expenses and general and administrative expenses.
Q5) Credit terms of 2/10,n/30 imply that the seller offers the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date.Otherwise,the full amount is due in 30 days.
A)True
B)False
Q6) Explain the way in which costs flow through the merchandise inventory account to a merchandiser's income statement.
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Chapter 5: Inventories and Cost of Sales
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Q1) Sandoval needs to determine its year-end inventory.The warehouse contains 20,000 units,of which 3,000 were damaged by flood and are not sellable.Another 2,000 units were purchased from Markor Company,FOB shipping point,and are currently in transit.The company also consigns goods and has 4,000 units at a consignee's location.How many units should Sandoval include in its year-end inventory?
A) 29,000
B) 21,000
C) 23,000
D) 19,000
E) 26,000
Q2) How do the consistency concept and the full disclosure principle affect inventory valuation?
Q3) When applying the lower of cost or market method of inventory valuation,market is defined as the ________.
Q4) Whether purchase costs are rising or falling,FIFO always will yield the highest gross profit and net income.
A)True
B)False
Q5) Identify and describe the four inventory valuation methods.
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Chapter 6: Cash, fraud, and Internal Controls
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Q1) Electronic funds transfers (EFTs)are decreasingly used by companies due to the inconvenience and high cost.
A)True
B)False
Q2) The internal document that is used to notify the appropriate person that ordered goods have been received and to describe the quantities and condition of the goods is the ________.
Q3) A set of procedures and approvals for verifying,approving,and recording obligations for eventual cash disbursement,and for issuing checks for payment only of verified,approved,and recorded obligations is referred to as a(n):
A) Internal cash system.
B) Petty cash system.
C) Cash disbursement system.
D) Voucher system.
E) Cash control system.
Q4) Outstanding checks are checks the bank has paid and deducted from the customer's account during the month.
A)True
B)False
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Chapter 7: Accounting for Receivables
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Q1) The current debit balance (before adjustments)in the allowance for doubtful accounts is $1,200.The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $6,000.
A)True
B)False
Q2) The person to whom a note is payable is known as the ________.
Q3) Duerr company makes a $60,000,60-day,12% cash loan to Ryan Co.The maturity value of the loan is: (Use 360 days a year.)
A) $60,000.
B) $1,200.
C) $61,200.
D) $58,800.
E) $67,200.
Q4) The process of using accounts receivable as security for a loan is known as pledging accounts receivable.
A)True
B)False
Q5) Explain the difference between honoring and dishonoring a note receivable.
Q6) What is the maturity date of a 120-day note receivable dated March 5?
Page 9
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Chapter 8: Accounting for Long-Term Assets
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Q1) On April 1 of the current year,a company disposed of a truck that had cost $20,000.The truck had a salvage value of $2,000,and a useful life of 5 years.The accounting records showed accumulated depreciation for this truck of $8,100 as of April 1 of the current year.The asset was discarded after an accident,and $10,500 cash was received from an insurance claim.Prepare the journal entry to record the disposal of the truck.
Q2) Revenue expenditures:
A) Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities.
B) Are known as balance sheet expenditures because they relate to plant assets.
C) Extend the asset's useful life.
D) Substantially benefit future periods.
E) Are debited to asset accounts when incurred.
Q3) Revising an estimate of the useful life or salvage value of a plant asset is referred to as a change in accounting estimate and is reflected in the current,and future financial statements.
A)True
B)False
Q4) Define plant assets and identify the four primary issues in accounting for them.
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Chapter 9: Accounting for Current Liabilities
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Q1) Payroll is an example of a contingent liability for the employer.
A)True
B)False
Q2) On May 22,Jarrett Company borrows $7,500 from Fairmont Financing,signing a 90-day,8%,$7,500 note.What is the journal entry needed to record the transaction by Jarrett Company?
A) Debit Cash $7,500; credit Accounts Payable $7,500.
B) Debit Accounts Payable $7,500; credit Notes Payable $7,500.
C) Debit Cash $7,650; credit Notes Payable $7,650.
D) Debit Cash $7,500; credit Notes Payable $7,500.
E) Debit Notes Receivable $7,500; credit Cash $7,500.
Q3) Employee vacation benefits:
A) Are estimated liabilities.
B) Are contingent liabilities.
C) Are recorded as an expense when the employee takes a vacation.
D) Are recorded as an expense when the employee retires.
E) Increase net income.
Q4) Identify and discuss the factors involved in computing federal income taxes withheld from employees.
Q5) Gross pay less all deductions is called ________.
Page 11
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Chapter 10: Accounting for Long-Term Liabilities
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Q1) Adonis Corporation issued 10-year,8% bonds with a par value of $200,000.Interest is paid semiannually.The market rate on the issue date was 7.5%.Adonis received $206,948 in cash proceeds.Which of the following statements is true?
A) Adonis must pay $200,000 at maturity and no interest payments.
B) Adonis must pay $206,948 at maturity and no interest payments.
C) Adonis must pay $200,000 at maturity plus 20 interest payments of $8,000 each.
D) Adonis must pay $206,948 at maturity plus 20 interest payments of $8,000 each.
E) Adonis must pay $200,000 at maturity plus 20 interest payments of $7,500 each.
Q2) Issuers of coupon bonds are not allowed to deduct the interest expense on their tax returns.
A)True
B)False
Q3) Periodic interest payments on bonds are determined by multiplying the par value of the bond by the contract rate.
A)True
B)False
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Chapter 11: Corporate Reporting and Analysis
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Q1) Treasury stock is classified as:
A) An asset account.
B) A contra asset account.
C) A revenue account.
D) A contra equity account.
E) A liability account.
Q2) A company paid $0.48 in cash dividends per share.Its earnings per share is $3.20 and its market price per share is $20.00.Its dividend yield equals:
A) 2.4%.
B) 6.25%.
C) 6.4%.
D) 6.67%.
E) 15.00%.
Q3) Large stock dividends are recorded at par or stated value.
A)True
B)False
Q4) Stockholders' equity consists of paid-in capital and retained earnings.
A)True
B)False
Q5) What is a stock split? How is a stock split different from a stock dividend?
Page 13
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Chapter 12: Reporting Cash Flows
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Q1) A company reported that its bonds with a par value of $50,000 and a carrying value of $57,000 are retired for $60,000 cash,resulting in a loss of $3,000.The amount to be reported under cash flows from financing activities is:
A) $(3,000).
B) $(60,000).
C) $(57,000).
D) $7,000.
E) $(7,000).
Q2) A method of computing and reporting that involves adjusting the net income amount by adding and subtracting items that are necessary to yield net cash provided (used)by operating activities.
A)Indirect method
B)Direct method
C)Statement of cash flows
D)Financing activities
E)Operating activities
F)Investing activities
Q3) What are the five usual steps involved in the preparation of the statement of cash flows?
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Chapter 13: Analysis of Financial Statements
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Q1) Price Earnings Ratio
A)Market Prospects
B)Liquidity and Efficiency
C)Solvency
D)Profitability
Q2) Calculate the percent increase or decrease for each of the following financial statement items:
\[\begin{array} { | l | r | r | }
\hline & \text { Year } 2 & { \text { Year } 1 } \\
\hline \text { Cash } & \$ 37,500 & \$ 30,000 \\
\hline \text { Accounts receivable } & 63,000 & 52,500 \\
\hline \text { Inventory } & 67,500 & 90,000 \\
\hline \text { Accounts payable } & 35,100 & 27,000 \\
\hline \text { Sales } & 187,500 & 150,000 \\
\hline \text { Equipment } 65,00 & 10 & 125,000 \\
\hline
\end{array}\]
Q3) In order to be classified as an extraordinary gain or loss,the item must be both (1)________ and (2)________.
Q4) Describe ratio analysis including its purpose,application,and interpretation.
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Chapter 14: Time Value of Money
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Q1) Interest is the borrower's payment to the owner of an asset,for its use.
A)True
B)False
Q2) Jackson has a loan that requires a $17,000 lump sum payment at the end of four years.The interest rate on the loan is 5%,compounded annually.How much did Jackson borrow today? (PV of $1,FV of $1,PVA of $1,and FVA of $1)(Use appropriate factor(s)from the tables provided.)
A) $16,150
B) $13,600
C) $11,504
D) $13,986
E) $15,343
Q3) The present value of an annuity table can be used to determine the value today of a series of payments to be received in the future.
A)True
B)False
Q4) When you reach retirement age,you will have one fund of $100,000 from which you are going to make annual withdrawals of $14,702.The fund will earn 6% per year.For how many years will you be able to draw an even amount of $14,702?
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Chapter 15: Investments
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Q1) Short-term investments in held-to-maturity debt securities are accounted for using the:
A) Fair value method with fair value adjustment to income.
B) Fair value method with fair value adjustment to equity.
C) Cost method with amortization.
D) Cost method without amortization.
E) Equity method.
Q2) Trading securities are securities that are purchased by trading securities with other companies rather than by paying cash.
A)True
B)False
Q3) Barnes Company purchased $50,000 of 8% bonds at par.The bonds mature in six years and are a held-to-maturity security.Which of the following is the correct journal entry to record the receipt of the semiannual interest payment?
A) debit Cash, $4,000; credit Long-Term Investments-HTM, $4,000.
B) debt Cash, $2,000; credit Long-Term Investments-HTM, $2000.
C) debit Cash, $2,000; credit Interest Revenue, $2,000.
D) debit Unrealized Gain-Equity, $2,000; credit Cash, $2,000.
E) debit Cash, $4,000; credit Unrealized Gain-Equity, $4,000.
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Chapter 16: Partnership Accounting
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Q1) If the net income for the current year is $135,000,then Farmer and Taylor's respective shares are:
A) $67,500; $67,500.
B) $130,000; $5,000.
C) $106,140; $28,860.
D) $90,000; $45,000.
E) $102,500; $32,500.
Q2) Palmer withdraws from the FAP Partnership.The remaining partners agree to buy out her share for her capital balance of $65,000.Prepare the journal entry to record the withdrawal from the partnership.
Q3) T.Andrews contributed $14,000 in to the T & B Partnership.The journal entry to record the transaction for the partnership is:
A) Debit Cash $14,000; credit T & B Partnership, Capital $14,000.
B) Debit Cash $14,000; credit T. Andrews, Capital $14,000.
C) Debit T & B Partnership $14,000; credit T. Andrews, Capital $14,000.
D) Debit T. Andrews, Capital $14,000; credit T & B Partnership, Capital $14,000.
E) Debit Cash $14,000; credit Common Stock $14,000.
Q4) ________ means that partners can commit or bind the partnership to any contract within the scope of the partnership business.
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