5-1
as as
MGT 6201 ACCOUNTING COMPREHENSIVE
EXAM | PRACTICE QUESTIONS AND
ANSWERS | COMPLETE STUDY GUIDE AND
EXAM PREP
SECTION I: FINANCIAL ACCOUNTING FUNDAMENTALS
as as as as
1. Which of the following is the fundamental accounting equation?
as as as as as as as as as
• A) Assets = Liabilities + Owner's Equity
as as as as as as
• B) Assets + Liabilities = Owner's Equity
as as as as as as
• C) Assets = Liabilities − Owner's Equity
as as as as as as
• D) Owner's Equity = Assets + Liabilities
as as as as as as
Correct Answer: A
as as
2. Under the accrual basis of accounting, revenues are recognized when:
as as as as as as as as as as
• A) Cash is received as as as
• B) The performance obligation is satisfied
as as as as as
• C) The invoice is printed
as as as as
• D) The fiscal year ends
as as as as
Correct Answer: B
as as
3. Which financial statement reports a company's financial position at a specific point in time?
as as as as as as as as as as as as as as
• A) Income Statement as as
• B) Statement of Cash Flows
as as as as
• C) Balance Sheet as as
• D) Statement of Retained Earnings
as as as as
Correct Answer: C
as as
4. A company purchased equipment for $50,000 with a useful life of 5 years and no salvage value. Using s
as as as as as as as as as as as as as as as as as as as
traight-line depreciation, what is the annual depreciation expense?
as as as as as as as
• A) $5,000 as
• B) $10,000 as
• C) $12,500 as
• D) $25,000 as
Correct Answer: B
as as
5. Which of the following is considered a current asset?
as as as as as as as as as
• A) Land as
• B) Equipment as
• C) Accounts Receivable
as as
• D) Bonds Payable as as
Correct Answer: C
as as
6. The matching principle requires that:
as as as as as
• A) Expenses be recorded in the same period as the revenues they help generate
as as as as as as as as as as as as as
• B) Assets equal liabilities plus equity
as as as as as
• C) Revenue be recorded when cash is received
as as as as as as as
• D) Dividends be paid in the same period as net income
as as as as as as as as as as
, 5-2 as Test Bank for Accounting Principles, Fourteenth Edition
as as as as as as as
Correct Answer: A as as
7. Which of the following transactions increases both assets and liabilities?
as as as as as as as as as as
• A) Paying cash for supplies as as as as
• B) Purchasing inventory on account
as as as as
• C) Receiving cash from a customer for services previously performed
as as as as as as as as as
• D) Paying off a bank loan as as as as as
Correct Answer: B as as
8. A company's retained earnings represents:
as as as as as
• A) Cash available for dividendsas as as as
• B) Cumulative net income minus dividends paid
as as as as as as
• C) Total stockholders' equity as as as
• D) The company's investment portfolio
as as as as
Correct Answer: B as as
SECTION II: THE INCOME STATEMENT & REVENUE RECOGNITION
as as as as as as as
9. Under ASC 606, revenue is recognized in five steps. Which of the following is NOT one of those steps?
as as as as as as as as as as as as as as as as as as as
• A) Identify the contract with the customer
as as as as as as
• B) Identify the performance obligations
as as as as
• C) Determine the transaction price
as as as as
• D) Record the revenue when cash is collected
as as as as as as as
Correct Answer: D as as
10. Gross profit is calculated as:
as as as as as
• A) Net Income − Operating Expenses
as as as as as
• B) Revenue − Cost of Goods Soldas as as as as as
• C) Revenue − All Expenses as as as as
• D) Operating Income + Interest Expense
as as as as as
Correct Answer: B as as
11. A company has revenue of $500,000, COGS of $300,000, and operating expenses of $120,000. What is
as as as as as as as as as as as as as as as as as
its operating income?
as as
• A) $200,000 as
• B) $80,000 as
• C) $120,000 as
• D) $180,000 as
Correct Answer: B (500,000 − 300,000 − 120,000 = 80,000)
as as as as as as as as as
12. Which of the following would be classified as a non-operating item on the income statement?
as as as as as as as as as as as as as as as
• A) Sales revenue as as
• B) Cost of goods sold as as as as
• C) Interest expense as as
• D) Salaries expense as as
Correct Answer: C as as
SECTION III: THE BALANCE SHEET & STATEMENT OF CASH FLOWS
as as as as as as as as as
13. Which of the following is classified as a long-term liability?
as as as as as as as as as as
• A) Accounts Payable as as
• B) Accrued Wages as as
• C) Bonds Payable due in 10 years
as as as as as as
• D) Short-term Notes Payable as as as
Correct Answer: C as as
, 5-3
as as
14. On the Statement of Cash Flows, the purchase of equipment would be classified as:
as as as as as as as as as as as as as as
• A) Operating activity as as
• B) Investing activity as as
• C) Financing activity as as
• D) Non-cash activity as as
Correct Answer: B as as
15. Dividends paid to shareholders are classified on the Statement of Cash Flows as:
as as as as as as as as as as as as as
• A) Operating activity as as
• B) Investing activity as as
• C) Financing activity as as
• D) Non-cash activity as as
Correct Answer: C as as
16. Which method of preparing the Statement of Cash Flows starts with net income and adjusts for non-
as as as as as as as as as as as as as as as as as
cash items? as
• A) Direct method as as
• B) Indirect method as as
• C) Equity method as as
• D) Consolidation method as as
Correct Answer: B as as
SECTION IV: MANAGERIAL ACCOUNTING
as as as
17. Which of the following is a fixed cost?
as as as as as as as as
• A) Direct materials as as
• B) Sales commissions as as
• C) Factory rent as as
• D) Hourly wages as as
Correct Answer: C as as
18. Contribution margin is defined as:
as as as as as
• A) Sales − Fixed Costs as as as as
• B) Sales − Variable Costs as as as as
• C) Net Income + Fixed Costs as as as as as
• D) Gross Profit − Operating Expenses
as as as as as
Correct Answer: B as as
19. A company sells a product for $40. Variable cost per unit is $25, and fixed costs are $60,000. What is t
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he break-even point in units?
as as as as
• A) 2,400 units as as
• B) 4,000 units as as
• C) 1,500 units as as
• D) 3,000 units as as
Correct Answer: B (60,000 ÷ (40 − 25) = 4,000)
as as as as as as as as as
20. Which of the following is NOT a component of a master budget?
as as as as as as as as as as as as
• A) Sales budget as as
• B) Production budget as as
• C) Cash budget as as
• D) Audit budget as as
Correct Answer: D as as
as as
MGT 6201 ACCOUNTING COMPREHENSIVE
EXAM | PRACTICE QUESTIONS AND
ANSWERS | COMPLETE STUDY GUIDE AND
EXAM PREP
SECTION I: FINANCIAL ACCOUNTING FUNDAMENTALS
as as as as
1. Which of the following is the fundamental accounting equation?
as as as as as as as as as
• A) Assets = Liabilities + Owner's Equity
as as as as as as
• B) Assets + Liabilities = Owner's Equity
as as as as as as
• C) Assets = Liabilities − Owner's Equity
as as as as as as
• D) Owner's Equity = Assets + Liabilities
as as as as as as
Correct Answer: A
as as
2. Under the accrual basis of accounting, revenues are recognized when:
as as as as as as as as as as
• A) Cash is received as as as
• B) The performance obligation is satisfied
as as as as as
• C) The invoice is printed
as as as as
• D) The fiscal year ends
as as as as
Correct Answer: B
as as
3. Which financial statement reports a company's financial position at a specific point in time?
as as as as as as as as as as as as as as
• A) Income Statement as as
• B) Statement of Cash Flows
as as as as
• C) Balance Sheet as as
• D) Statement of Retained Earnings
as as as as
Correct Answer: C
as as
4. A company purchased equipment for $50,000 with a useful life of 5 years and no salvage value. Using s
as as as as as as as as as as as as as as as as as as as
traight-line depreciation, what is the annual depreciation expense?
as as as as as as as
• A) $5,000 as
• B) $10,000 as
• C) $12,500 as
• D) $25,000 as
Correct Answer: B
as as
5. Which of the following is considered a current asset?
as as as as as as as as as
• A) Land as
• B) Equipment as
• C) Accounts Receivable
as as
• D) Bonds Payable as as
Correct Answer: C
as as
6. The matching principle requires that:
as as as as as
• A) Expenses be recorded in the same period as the revenues they help generate
as as as as as as as as as as as as as
• B) Assets equal liabilities plus equity
as as as as as
• C) Revenue be recorded when cash is received
as as as as as as as
• D) Dividends be paid in the same period as net income
as as as as as as as as as as
, 5-2 as Test Bank for Accounting Principles, Fourteenth Edition
as as as as as as as
Correct Answer: A as as
7. Which of the following transactions increases both assets and liabilities?
as as as as as as as as as as
• A) Paying cash for supplies as as as as
• B) Purchasing inventory on account
as as as as
• C) Receiving cash from a customer for services previously performed
as as as as as as as as as
• D) Paying off a bank loan as as as as as
Correct Answer: B as as
8. A company's retained earnings represents:
as as as as as
• A) Cash available for dividendsas as as as
• B) Cumulative net income minus dividends paid
as as as as as as
• C) Total stockholders' equity as as as
• D) The company's investment portfolio
as as as as
Correct Answer: B as as
SECTION II: THE INCOME STATEMENT & REVENUE RECOGNITION
as as as as as as as
9. Under ASC 606, revenue is recognized in five steps. Which of the following is NOT one of those steps?
as as as as as as as as as as as as as as as as as as as
• A) Identify the contract with the customer
as as as as as as
• B) Identify the performance obligations
as as as as
• C) Determine the transaction price
as as as as
• D) Record the revenue when cash is collected
as as as as as as as
Correct Answer: D as as
10. Gross profit is calculated as:
as as as as as
• A) Net Income − Operating Expenses
as as as as as
• B) Revenue − Cost of Goods Soldas as as as as as
• C) Revenue − All Expenses as as as as
• D) Operating Income + Interest Expense
as as as as as
Correct Answer: B as as
11. A company has revenue of $500,000, COGS of $300,000, and operating expenses of $120,000. What is
as as as as as as as as as as as as as as as as as
its operating income?
as as
• A) $200,000 as
• B) $80,000 as
• C) $120,000 as
• D) $180,000 as
Correct Answer: B (500,000 − 300,000 − 120,000 = 80,000)
as as as as as as as as as
12. Which of the following would be classified as a non-operating item on the income statement?
as as as as as as as as as as as as as as as
• A) Sales revenue as as
• B) Cost of goods sold as as as as
• C) Interest expense as as
• D) Salaries expense as as
Correct Answer: C as as
SECTION III: THE BALANCE SHEET & STATEMENT OF CASH FLOWS
as as as as as as as as as
13. Which of the following is classified as a long-term liability?
as as as as as as as as as as
• A) Accounts Payable as as
• B) Accrued Wages as as
• C) Bonds Payable due in 10 years
as as as as as as
• D) Short-term Notes Payable as as as
Correct Answer: C as as
, 5-3
as as
14. On the Statement of Cash Flows, the purchase of equipment would be classified as:
as as as as as as as as as as as as as as
• A) Operating activity as as
• B) Investing activity as as
• C) Financing activity as as
• D) Non-cash activity as as
Correct Answer: B as as
15. Dividends paid to shareholders are classified on the Statement of Cash Flows as:
as as as as as as as as as as as as as
• A) Operating activity as as
• B) Investing activity as as
• C) Financing activity as as
• D) Non-cash activity as as
Correct Answer: C as as
16. Which method of preparing the Statement of Cash Flows starts with net income and adjusts for non-
as as as as as as as as as as as as as as as as as
cash items? as
• A) Direct method as as
• B) Indirect method as as
• C) Equity method as as
• D) Consolidation method as as
Correct Answer: B as as
SECTION IV: MANAGERIAL ACCOUNTING
as as as
17. Which of the following is a fixed cost?
as as as as as as as as
• A) Direct materials as as
• B) Sales commissions as as
• C) Factory rent as as
• D) Hourly wages as as
Correct Answer: C as as
18. Contribution margin is defined as:
as as as as as
• A) Sales − Fixed Costs as as as as
• B) Sales − Variable Costs as as as as
• C) Net Income + Fixed Costs as as as as as
• D) Gross Profit − Operating Expenses
as as as as as
Correct Answer: B as as
19. A company sells a product for $40. Variable cost per unit is $25, and fixed costs are $60,000. What is t
as as as as as as as as as as as as as as as as as as as as as
he break-even point in units?
as as as as
• A) 2,400 units as as
• B) 4,000 units as as
• C) 1,500 units as as
• D) 3,000 units as as
Correct Answer: B (60,000 ÷ (40 − 25) = 4,000)
as as as as as as as as as
20. Which of the following is NOT a component of a master budget?
as as as as as as as as as as as as
• A) Sales budget as as
• B) Production budget as as
• C) Cash budget as as
• D) Audit budget as as
Correct Answer: D as as
