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Course 210 Pretest

Course 210 is full of accounting terminology, and it is important that you have a strong understanding of accounting basics in order to do well in the course. Completing course 130 (Accounting Basics) or passing the 210 Pretest below is required for each student intending on taking course 210.

Please complete the following 33 questions by selecting the choice that best answers the question.

You will receive an email confirmation that the IBBA has received your scores.

You must answer 27 out of the 33 questions correctly to pass the 210 Pre-Test.

First Name:*

Last Name:*

Email Address:*

Affiliate You Are Taking Course 210 At: (CABB, CABI, TABB, etc.)*

Cash basis accounting recognizes income:
When income is earned
When the tax return is filed
When income is received
Only at the end of the year

Accrual basis accounting recognizes income:
When income is earned
When the tax return is filed
When income is received
Only at the end of the year
None of the above

A broker may collect comparable industry data when valuing a business, using the SIC. The term "SIC" means:
Standard Interest Component
Standard Industrial Classification
Seller's Income Categorization
Summary of Internal Costs

In a retail company, beginning inventory, plus purchases, less ending inventory equals:
Cost of Goods Sold
Cost of Goods Available For Sale
Net Sales
Gross Profit
None of the above

The statement expressing the financial status of the business as of a single, given date is the:
Balance Sheet
Statement of Cash Flows
Income Statement
Tax Return

Amortization is most like:
Depreciation
Principal
Interest
Accounts Receivable

The value of the ending inventory is increased. Assuming this is because of a LIFO to FIFO change that would cause:
A) Profit to increase
B) Profit to decrease
C) Neither A nor B
D) It's illegal

FIFO means:
Last in First Out
Freight is First Out
First in First Out
First in Fast Out
None of the Above

If a company you are analyzing is on the LIFO method of inventory, and you wish to change to the FIFO method for analytical purposes, you would most likely obtain the amount of the difference (LIFO reserve) from:
A) Business Owner
B) Audited statements' notes
C) The company's accountant
D) B or C

Marketable securities, short-term notes and contracts receivables are examples of:
Current assets
Prepaid expenses
Long term assets
Non current assets
Intangible assets

Straight-line depreciation is essentially the division of an item's original - in place cost divided by the number of years of estimated useful life. This is:
The only depreciation method used in recasting
Only one of sevaral common methods used
Rarely used in recasting
The accepted definition of the fair market value of an asset

Book Value is:
Replacement value
Historic or original cost
The depreciated value of the asset, as stated on the accountant's financial statement
Amount depreciated

Reserve for Replacement is essentially another name for the concept of:
Depreciation
Amortization
FIFO
Aging

If your subject company's Balance Sheet does not show any Accounts Payable:
It means they pay their bills promptly
It means that you will definitely find Accounts Receivable on the Balance Sheet
It probably means they are using cash basis accounting
It means they are probably using accrual basis accounting
None of the above

Owner's equity is synonymous with which of the following?
Cash, Inventory and Other Assets
Net asset value
Net worth
All of the above

Gross Profit equals:
Profit after expenses, but before taxes
Net sales less cost of goods sold
Gross Sales
Profit before other income/expenses

Net Operating Income is:
A) Total Revenues less all expenses and other losses
B) Gross Profit less operating expenses
C) Both A & B
D) Neither A nor B

GAAP stands for:
Generally Accepted As Prerequisites
General American Accounting Principles
Generally Accepted Accounting Principles
None of the above

The Statement of Cash Flows evaluates a company's sources and uses of cash from:
Operations
Financing Activities
Investing Activities
All of the above

What are three main classes of assets?
Accounts receivable; inventory; current assets
New assets; old assets; future assets
Depreciation; intangible assets; book assets
Intangilbe assets; current assets; fixed assets

When a buyer purchases goodwill, he/she may:
Record it as a current liability
Amortize it for income tax purposes
Record it as a donation
Ignore it

Which of the following is true:
Assets + liabilities = owner's equity
Assets = liabilities + owner's equity
Liabilities = assets + owner's equity
Assets = liabilities - owner's equity

Where and why should interest expense be reflected in the financial statements?
As an operating expense because it is a cost of capital
In other income/expense because it is a cost of capital
As an operating expense because it recurs annually
None of the above

When a company records accrued payroll expense, which of the follwoing is true:
A) Net income is decreased
B) Net income is increased
C) Current liabilities are increased
D) Both A & C
E) Both B & C

In reconciling the accumulated depreiation account between years, you note that beginning accumulated depreciation plus current year depreciation expense is greater than the balance in the ending accumulated depreciation account. Your most likely conclusion in this situation is that:
The company purchased some new assets
The accountant made a mistake and recorded the incorrect depreciation expense
The company sold some existing assets
None of the above

Retained earnings can be reconciled between years. What is missing from the equation: Beginning Retained Earnings minus Dividends equals Ending Retained Earnings.
Add sales
Add capital stock
Add net income
Add fixed asset purchases

To convert a Cash Basis Income Statement to an Accrual Basis Income Statement, you should:
Increase sales by ending accounts receivable and decrease sales by beginning accounts receivable
Decrease sales by ending accounts receivable and increase sales by beginning accounts receivable
Increase expenses by ending accounts receivable and decrease expenses by beginning accounts receivable
Decrease expenses by ending accounts receivable and increase expenses by beginning accounts receivable

To convert a Cash Basis Income Statement to an Accrual Basis Income Statement, you should:
Increase sales by beginning accounts payable and decrease sales by beginning accounts payable
Decrease sales by ending accounts payable and increase sales by beginning accounts payable
Increase expenses by ending accounts payable and decrease expenses by beginning accounts payable
Decrease expenses by ending accounts payable and increase expenses by beginning accounts payable

The gain of loss on the sale of an asset is measured by the difference between the proceeds received on the sale and the:
The remaining note payable balance against the asset
The original cost of the asset
The net book value of the asset
The original cost less the note payable balance owed on the asset

With respect to a sole proprietorship, payments made to the owner are reflected in the financial statements as:
Salary in the wages expense account
Salary in the officer salary account
Non-operating expense
Reduction in owner's equity

With respect to a corporation, payments made to the owner are reflected in the financial statements as:
Salary in the wages expense account
Salary in the officer salary account
Non-operating expense
Reduction in owner's equity

The current portion of notes payable shown as a current liability on the balance sheet of a company represents:
The principal and interest payments on notes payable due over the next twelve months
The principal payments on notes payable due over the next twelve months
The principal payments on notes payable due over the next thirty days
The principal and interest payments on notes payable due over the next thirty days

Goodwill is usually reflected on the balance sheet as:
A non-current liability
A non-current asset
A fixed asset
A current asset

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