CLEP Financial Accounting Exam Practice Test | Practice Test / Quiz / MCQs

1. Mr. Clark incorporated his sole proprietorship. He contributed $5,000 of cash in addition to equipment with a historical cost of $16,000 and accumulated depreciation of $4,000. In exchange for these assets, Mr. Clark gets 100 shares of $10 par common stock. Which of the following is part of the journal entry to record this transaction on the corporate books?

Credit cash $5,000Credit additional paid-in capital in excess of par $24,000Debit equipment $12,000Debit accumulated depreciation $4,000Credit common stock $1,000

2. Which of the following is something you will find on the face of a bond?

The dates of periodic paymentsA bond amortization scheduleThe purchase price stated as a percent of present valueThe present value of principal and interest paymentsMarket interest rate

3. The following are all the asset accounts and liability accounts on the balance sheet.

• Cash $1,000	• Petty cash $100
• Short-term investments $8,900	• Inventories $10,000
• Total current liabilities $20,000	• Total long-term debt $80,000

Which of the following is the quick ratio?

1.1%100%50%5.5%10%

4. X-Corp borrowed $10,000 on December 1, 20x1. It must pay off the loan with 10 monthly principal payments of $1,000 plus 12% interest on any unpaid balance. On January 1, 20x2, it paid $1,100. What journal entry should X-Corp make on December 31, 20x1?

Debit interest payable $100; credit cash $100Debit principal payable $1,000; debit interest payable $100; credit loan payable $1,100Debit interest expense $1,100; credit interest payable $1,100Debit interest expense $100; credit interest payable $100No entry is needed.

5. From the following corporate information, compute the return on common stockholders’ equity.

Average common stock equity	$100,000
Net income	50,000
Preferred stock dividends	10,000
Number of common shares	20,000

50%$3.0040%$2.50$2.00

6. On December 1, 20x1, ABC Co. received $12,000 for 12 months of rent income paid in advance. ABC records this entry by: debit cash $12,000; credit deferred rent income $12,000. What type of account is deferred rent income?

AssetRevenueLiabilityContra-assetExpense

7. Which depreciation method below never uses a salvage value at any time?

Units of production methodStraight-line methodDouble declining balance methodMACRS tax methodAccelerated depreciation method

8. Which accounts normally have a debit balance?
I. Assets
II. Liabilities
III.. Equity
IV.. Income
V. Expense

II., III, and IV. onlyI. and V onlyI, II, and III onlyIV. and V onlyI. and IV. only

9. A professional self-employed violinist sold his violin for $100,000. He bought it 40 years ago for $10,000 and depreciated it over 30 years with a zero salvage value. Which is part of the journal entry to record the sale?

Debit gain on sale of violin $100,000Credit gain on sale of violin $90,000Debit cash $90,000Debit violin account $10,000Debit accumulated depreciation $10,000

10. ABC Co. spent $15,000 to develop a working model of a new gadget and $5,000 for attorney fees to get a patent on the gadget. The estimated useful life of the gadget is 10 years. Which of the following is part of the journal entry to record a full year of amortization for the patent?

Credit patent expense $2,000Credit accumulated amortization—patent $2,000Credit patent $2,000Debit patent $1,500Credit accumulated amortization—patent $1,500

11. Which statement below about expenses is FALSE?

Borrowing money is not an expense.Expenses always make owner’s equity go down.Expenses always involve cash leaving the business.Expenses always lower net income.Expenses usually happen as a result of normal business operations.

12. Which of the following are parts of a heading for a balance sheet?
I. A date
II. The name of the business
III.. The name of the owner
IV.. A period of time

II. and III onlyI, II, III, and IV.I, II, and III onlyI, II, and IV. onlyI. and II only

14. On the books, you see an account called “unrealized gain/loss on marketable securities.” In the account is a single transaction showing a $3,000 debit. Which statement could be TRUE?

The business sold its investments in marketable securities for a $3,000 gain.The business sold equipment for a loss of $3,000.Short-term investments in stock went down $3,000, but the stock was not sold.Short-term investments in bonds were sold for a $3,000 loss.Short-term investments in marketable securities have gone up $3,000, but the securities have not been sold.

15. Which of the following is a positive cash adjustment to the cash flows from financing activities section of the cash flow statement?

Employee repaid loanDepreciation expensePaid preferred stock dividendsSale of equipmentSale of treasury stock

16. The Sarbanes-Oxley Act (SOX)

requires ethical violations to be disclosed on income tax returnsrequires corporate conflicts of interest to be listed as liabilities on the balance sheetdefines all things lawful as ethicalauthorizes higher criminal penalties for managers if ethical policies are not enforceddefines the code of ethics for accountants

17. When a business owner writes a check from the business checking account to pay for personal groceries, the proper journal entry will include

a debit to the groceries expense accounta credit to an income accounta credit to the owner’s equity accounta debit to the cash accounta debit to the withdrawal account

18. ABC Co. recently bought a building, land with mineral rights, a patent good for five years, and goodwill when it bought a marketing firm. This year ABC profits have soared, especially from the marketing firm and from selling some of the minerals. Which is most likely completely TRUE about expenses this year from these items?

ABC will depreciate the building and the land, and deplete the mineral rights.ABC will have some amortization expense from the patent and the goodwill.ABC will have no land depreciation expense and no amortization from goodwill.ABC will have some depreciation expense but no depletion expense.ABC will depreciate, deplete, or amortize all these items this year.

19. Bill mistakenly charged Jill $100 too much for plumbing services. When Bill returns the money to Jill, Bill will most probably correct his books by debiting

the overcharges contra-sales accountthe withdrawal accountthe mistakes expense accountthe cash accountthe plumbing income account

20. ABC Co. has $100,000 in accounts receivable and no allowance for uncollectible accounts. ABC’s history indicates that 2% of accounts receivable will probably not be collected. In June, JonesCo notified ABC that it could not pay its $1,000 debt on time. ABC wishes to continue collecting on the JonesCo account. Which of the following is part of the journal entry to reflect these events, assuming that ABC uses the direct write-off method of handling bad debts?

Credit allowance for doubtful accounts $2,000There is no journal entry required for any of the above events.Credit allowance for doubtful accounts $1,000Debit bad debt expense $2,000Credit accounts receivable $1,000

21. Jones & Jones issued $100,000 of 6% bonds at a price of $95. The bond issuance cost was $3,000. Which of the following is part of the journal entry to record these bonds on Jones & Jones books?

Credit bond issuance expense $3,000Credit bonds payable $95,000Debit interest expense $6,000Credit premium on bonds payable $5,000Debit cash $92,000

22. Which of the following is NOT part of a general journal entry?

The date of the entryThe current balance of the affected accountsA debit entry with a number in the debit columnA credit entry with a number in the credit columnAn explanation, commonly placed inside parentheses

23. MegaCorp is a large retailer. Which item below would you NOT expect to find on MegaCorp’s depreciation schedule?

A column for the depreciation for each asset for the current yearThe date of purchase for all assets on the scheduleA column identifying the depreciation method used for each assetDepreciation for a $1,000,000 building over its 40-year lifeDepreciation for a $100 electric drill with a useful life of 3 years

24. Which accounts get closed out to zero at the end of the year?
I. Asset accounts
II. Liability accounts
III.. Withdrawal account
IV.. Income accounts
V. Expense accounts

I, II, and III onlyV onlyIII., IV., and V onlyIV. and V onlyI. only

25. Max, a self-employed computer programmer, contracted on December 3, 20x1, with an exterminator to kill termites in his office building. On December 22, 20x1, Max received a bill for termite services completed. Max paid the bill on January 5, 20x2. Max is wondering whether to use accrual accounting or cash basis accounting. Which statement correctly explains the difference between the two systems?

Accrual accounting shows the extermination expense on December 22; cash basis shows the expense on January 5.Accrual accounting records the accounts payable on December 22; cash basis records accounts payable on January 5.Accrual accounting never uses an accounts payable account; cash basis accounting does.Accrual accounting shows the extermination expense on December 3; cash basis shows the expense on December 22.Accrual accounting shows the extermination expense on December 31; cash basis shows the expense on January 5.

25 Questions

❤ If you liked Fatskills, consider supporting us by checking out The Life Manuals You Never Got.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know?
Privacy | Terms |

Without work one finishes nothing. - Ralph Waldo Emerson
© 2026 Fatskills.com

All trademarks, logos and brand names are the property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, trademarks and brands does not imply endorsement.

25 Questions

❤ If you liked Fatskills, consider supporting us by checking out The Life Manuals You Never Got.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know? Privacy | Terms |

Without work one finishes nothing. - Ralph Waldo Emerson© 2026 Fatskills.com

All trademarks, logos and brand names are the property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, trademarks and brands does not imply endorsement.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know?
Privacy | Terms |

Without work one finishes nothing. - Ralph Waldo Emerson
© 2026 Fatskills.com