Sample Questions: Financial Accounting

The following Financial Accounting sample questions aren't used in actual CLEP exams and aren’t presented here as they will be on the test. Use them to get a sense of question format and difficulty level.

Directions

Each of the questions or incomplete statements below is followed by five suggested answers or completions. Select the one that is best in each case.

Questions

1. ONECO gives a one-year warranty on all of its equipment. In January, a customer placed an order for a piece of equipment. The equipment was delivered and billed in February. The customer remitted half of the cash due in March and the other half in April. According to the matching principle of accounting, in which month should ONECO report estimated warranty expense related to the sale?
   1. January
   2. February
   3. March
   4. April
   5. December
2. Which of the following affects both the balance sheet and the income statement?
   1. Purchase of inventory
   2. Retirement of a fully depreciated machine with no salvage value
   3. Collection of accounts receivable
   4. Expiration of prepaid insurance
   5. Declaration of a cash dividend
3. A company’s beginning inventory is $20,000, purchases for a period are $240,000, and ending inventory is $30,000. How much is cost of goods sold?
   1. $220,000
   2. $230,000
   3. $240,000
   4. $250,000
   5. $290,000
4. Which of the following appears separately, net of income tax, on an income statement?
   1. Gross profit
   2. Gain on sale of a truck
   3. Interest expense
   4. Cost of goods sold
   5. Sales discount
5. A mortgage of $420,000 has principal payments totaling $120,000 that are due within the next year. The remaining $300,000 is not due until after one year. How is the mortgage shown on the balance sheet?
   1. As a current liability of $420,000
   2. As a long-term liability of $420,000
   3. As another liability of $420,000 with a footnote breaking out current and long-term portions
   4. As a current liability of $120,000 and a long-term liability of $300,000
   5. As a disclosure item only

6. The inventory data for an item for July are as follows:

   • July 1 — Inventory: 10 units at $15
   • July 3 — Sold: 5 units
   • July 10 — Purchased: 12 units at $16
   • July 18 — Sold: 8 units
   • July 27 — Purchased: 15 units at $17

   Using the perpetual system, costing by the first-in, first-out (FIFO) method, what is the cost of the ending inventory on July 31?

   1. $255
   2. $360
   3. $376
   4. $384
   5. $399

7. In which section(s) of the cash-flow statement do the following appear?

   Interest Paid — Dividends Paid

   1. Financing — Financing
   2. Financing — Investing
   3. Financing — Operating
   4. Investing — Investing
   5. Operating — Financing

Answers

1) B   2) D   3) B   4) D   5) D   6) E   7) E