VILLANOVA UNIVERSITY
School of Business
Department of Accountancy
Exam 1-Pretest, Dr. K. Hiltebeitel
The following multiple choice questions were part of an exam that I gave several
years ago. They should be useful as a pretest in preparation for the multiple
choice section of your first exam. Several of the questions are not appropriate
for your exam. They will be marked with an *. Answers appear at the end.
PART 1 - MULTIPLE CHOICE (2 POINTS EACH)
1.
If a company's total assets decreased, while liabilities and
contributed capital were unchanged, and no dividends were paid then:
A)
retained earnings were less than net income during the period.
B)
the company must have purchased assets with cash.
C)
cash flow from operating activities is greater than cash flow from
investing activities.
D)
revenues were less than expenses.
2.
Falcon Company paid cash to purchase land.
accounting event:
A)
total equity increased.
B)
total liabilities decreased.
C)
total assets were unaffected.
D)
none of the above.
As a result of this
3.
During 20X4, the Oku Company earned $1,200 of cash revenue, made
cash dividends (i.e., distributions) of $500 to owners and paid $600 for
cash expenses. Which of the following accurately describes the total
effect of these events on the elements of the company's financial
statements?
A)
Equity would increase by $100.
B)
Equity would increase by $600.
C)
Assets would increase by $1,100.
D)
Assets would increase by $600.
4.
Based
A)
B)
C)
D)
During 20X2, Rouse Company loaned $900 cash to the Odyssey Company.
on this information, which of the following is true?
Net income would be reduced.
Liabilities would increase.
Expenses would increase.
Assets would not change.
5*.
Which of the following items should be reported separately from the
income from continuing operations on a company's income statement?
A)
Loss incurred from earthquake damage.
B)
Dividends (ie, distributions) paid to owners.
C)
Revenue earned from providing services to customers.
D)
Cash paid to purchase land.
6.
Which of the following groups has the primary responsibility for
establishing GAAP for business entities in the United States?
A)
U. S. Congress.
B)
Government Accounting Standards Board.
C)
Internal Revenue Service.
D)
Financial Accounting Standards Board.
7.
Simba Company borrowed $10,000 on September 1, 20X4 from the
National Bank. Simba agreed to pay interest annually at the rate of 12%
per year. The note issued by Simba carried an 18-month term. Based on
this information the amount of interest expense appearing in the 20X4
income statement would be:
A)
$400.
B)
$300.
C)
$-0-.
D)
$267.
Use the following to answer questions 8-9:
Obi Company experienced the following transactions during 20X1.
(1).
(2).
(3).
(4).
(5).
(6).
Owners invested $3,000 cash in the business.
Provided $1,200 of services on account.
Incurred $800 of operating expenses on account.
Collected $900 of cash from accounts receivable.
Paid $750 cash on accounts payable.
Paid a $50 cash dividend to owners.
8.
The amount of net income recognized on Obi Company's 20X1 income
statement is:
A)
$300.
B)
$250.
C)
$200.
D)
$400.
9.
The amount of net cash flow from operating activities shown on Obi
Company's 20X1 statement of cash flows is:
A)
$300.
B)
$400.
C)
$200.
D)
$150.
10.
The beginning balance in accounts receivable was $5,000. Sales on
account amounted to $40,000. If the ending balance in accounts receivable
was $8,000, the amount of cash collected from customers is:
A)
$32,000.
B)
$37,000.
C)
$43,000.
D)
$45,000.
11.
A)
B)
C)
D)
When revenue is earned on account:
total assets increase and total equity decreases.
total assets and total liabilities increase.
total assets, liabilities, and equity are not affected.
total assets and total equity increase.
12.
Which of the following would cause net income
to be different than (either higher or lower) "cash
activities" on the statement of cash flows?
A)
Made a cash distribution to the owners of the
B)
Accrued interest earned on the certificate of
C)
Purchased land for cash.
D)
Purchased a certificate of deposit for cash.
on the accrual basis
provided by operating
business.
deposit.
13.
If the financial statements present fairly in all material respects
a company's financial position, the results of operations, and the cash
flows in conformity with GAAP, the auditor will issue the following type
of audit opinion:
A)
Disclaimer.
B)
Unqualified opinion.
C)
Adverse opinion.
D)
Qualified opinion.
14.
The Brandt Company started the accounting period with $300 in
supplies. During the period the company purchased $700 of supplies on
account. At the end of the accounting period there were $200 of supplies
on hand. Based on this information, the amount of supplies expense
appearing on the end-of-period income statement would be:
A)
$200.
B)
$800.
C)
$500.
D)
$700.
15*. Civic Company purchased an asset costing $20,000 on January 1, 20X3.
The asset had an expected five year life and a $2,000 salvage value.
Based on this information, the amount of depreciation expense and
accumulated depreciation appearing on the 20X6 financial statements would
be:
A)
$4,000 and $12,000, respectively.
B)
$3,600 and $10,800, respectively.
C)
$4,000 and $16,000, respectively.
D)
$3,600 and $14,400, respectively.
16.
A company mistakenly recorded a cash purchase of a computer as an
expense instead of an asset. The cash portion of the transaction was
recorded correctly. As a result of this error:
A)
assets and equity will be overstated.
B)
assets will be overstated and equity will be understated.
C)
assets and equity will be understated.
D)
assets will be understated and equity will be overstated.
17.
Price Company purchased land for $6,000 on January 1, 20X1. The
company sold the land for $5,800 on December 1, 20X1. The amount of
revenue recognized in 20X1 was $20,000 and the amount of expenses incurred
were $14,000. Based on this information, what was the amount of net
income on the company's 20X1 income statement?
A)
$6,200
B)
$5,800
C)
$6,000
D)
None of the above.
Use the following to answer questions 18-19:
BC Company signed a two year contract to perform consulting services for a local
manufacturer on October 1, 20X4. BC received $40,000 cash as an advance payment
for these services and agreed the work would begin immediately.
18.
The amount of revenue that would appear on the 20X4 and 20X5 income
statement would be:
A)
$ 5,000/ $20,000.
B)
$10,000 / $20,000.
C)
$20,000 / $20,000.
D)
$40,000 / $
-0-.
19.
The amount of cash flow that would be on the 20X4 and 20X5 cash
statement would be:
A)
$
-0- / $40,000.
B)
$10,000 / $20,000.
C)
$5,000 / $20,000.
D)
$40,000 / $
-0-.
Use the following to answer questions 20-21:
At the end of 20X3 the following information is available for Bridge, Poker and
Rummy Companies.
Bridge
Total Assets
$1,000,000
Total Liabilities
700,000
Owners' Equity
300,000
Net Income
59,000
Poker
$1,000,000
400,000
600,000
95,000
Rummy
$1,200,000
900,000
300,000
75,000
20.
A)
B)
C)
D)
Which company has the highest level of financial risk?
They all have equal financial risk
Bridge
Poker
Rummy
21.
A)
B)
C)
C)
Which company is getting the greatest return on assets?
Bridge
Rummy
They all have equal return on assets.
Poker
22.
Which of the following errors would cause the debit side of a trial
balance to be larger than the credit side?
A)
Revenue earned on account was recorded with a debit to cash and a
credit to revenue.
B)
Land purchased with cash was recorded with a debit to the land
account and a credit to notes payable.
C)
Supplies purchased on account was recorded with a credit to supplies
and a debit to accounts payable.
D)
None of the above.
23.
The following account balances prior to closing entries were taken
from the records of DD Company .
Revenues
$2,700
Operating Expenses
1,200
Dividends
500
Retained Earnings, January 1, 20X1
5,000
After
A)
B)
C)
D)
closing entries at December 31, 20X1, retained earnings will be:
$6,000.
$5,000.
$6,500.
$1,000.
24.
Adjusting entries are made at the end of the period because of the
need to
A)
prepare revenue and expense accounts for recording transactions in
the next accounting period by bringing the balances to zero.
B)
adjust the balance in cash account for the effects of all daily
transactions with customers and creditors.
C)
assure that all revenues and expenses are recognized in the period
in which they are earned or incurred
D)
adjust retained earnings for net income and dividends.
25.
The following accounts are from the accounting records of AAB
Company:
Cash
Equipment
Contributed Capital
Retained Earnings
Revenue
Expenses
Dividends
After
of
A)
B)
C)
D)
$1,300
1,500
700
800
2,000
600
100
closing entries, the Retained Earnings account will have a balance
$2,100
$1,400
$2,800
$2,200
PART 2 - PROBLEMS
Name__________________________ Class Hour_______
ANSWER SHEET- MULTIPLE CHOICE
1
2
3
4
5
6
7
8
9
10
11
12
13
D
C
A
B
A
D
A
D
D
B
D
B
B
14
15
16
17
18
19
20
21
22
23
24
25
B
D
C
B
A
D
D
C
D
A
C
A
Row______