Q: A company recognizes revenue using the percentage-of-completion method for a construction contract. If the total contract value is $$1,000,000, costs incurred to date are 400$$,000, and estimated total costs are $800,000, what is the revenue to be recognized to date?

$$ Revenue = \frac{400,000}{800,000} \times 1,000,000 = 500,000 $$

Question 1

Which of the following best describes the accrual accounting principle?

Accepted Answer

Revenues and expenses are recognized when they are earned or incurred, regardless of when cash is exchanged.

Question 2

A company sells goods worth $10,000 on credit. According to the accrual basis of accounting, when should the revenue be recognized?

Accepted Answer

When the goods are delivered to the customer.

Question 3

Which formula correctly calculates the net profit margin?

Accepted Answer

$$ Net\ Profit\ Margin = \frac{Net\ Income}{Total\ Revenue} $$

Question 4

A company purchased equipment for $50,000 with an estimated useful life of 5 years and no residual value. Using straight-line depreciation, what is the annual depreciation expense?

Accepted Answer

$$ \10$$,000 $

Question 5

Which of the following is NOT a component of the balance sheet?

Accepted Answer

Revenue

Question 6

If a company has current assets of $$120,000 and current liabilities of 80$$,000, what is its current ratio?

Accepted Answer

$$ Current\ Ratio = \frac{120,000}{80,000} = 1.5 $$

Question 7

Which statement best describes the purpose of the Statement of Cash Flows?

Accepted Answer

To report the company’s cash inflows and outflows from operating, investing, and financing activities.

Question 8

A company recognizes revenue using the percentage-of-completion method for a construction contract. If the total contract value is $$1,000,000, costs incurred to date are 400$$,000, and estimated total costs are $800,000, what is the revenue to be recognized to date?

Accepted Answer

$$ Revenue = \frac{400,000}{800,000} 	imes 1,000,000 = 500,000 $$

Question 9

Which of the following transactions would NOT affect the equity section of the balance sheet?

Accepted Answer

Purchasing inventory for cash

Question 10

Inventory is valued at the lower of cost and net realizable value. If the cost of inventory is $$15,000 and its net realizable value is 12$$,000, at what amount should the inventory be reported?

Accepted Answer

$$ \12$$,000 $

Question 11

Which of the following is an example of an investing activity in the Statement of Cash Flows?

Accepted Answer

Purchase of equipment

Question 12

A company’s trial balance shows total debits of $$500,000 and total credits of 480$$,000. What does this indicate?

Accepted Answer

There is a $20,000 error that must be investigated.

Question 13

Which of the following best describes the matching principle?

Accepted Answer

Expenses are recognized in the same period as the related revenues.

Question 14

A company issues a bond at par value of $100,000. What is the effect on the company’s financial statements?

Accepted Answer

Increase in assets and increase in liabilities by $100,000.

Question 15

Which formula is used to calculate Return on Assets (ROA)?

Accepted Answer

$$ ROA = \frac{Net\ Income}{Average\ Total\ Assets} $$

Question 16

Which of the following is NOT a cash equivalent?

Accepted Answer

Inventory held for sale

Question 17

A company’s Statement of Financial Position shows total assets of $$500,000 and total liabilities of 350$$,000. What is the company’s equity?

Accepted Answer

$$ Equity = 500,000 - 350,000 = 150,000 $$

Question 18

Which of the following is a key difference between the direct and indirect methods of preparing the Statement of Cash Flows?

Accepted Answer

The direct method lists cash receipts and payments from operating activities, while the indirect method adjusts net income for non-cash items.

Question 19

A company has the following balances: Sales $$200,000, Cost of Goods Sold 120$$,000, Operating Expenses $$40,000, Interest Expense 10$$,000, and Tax Expense $6,000. What is the net income?

Accepted Answer

$$ Net\ Income = 200,000 - 120,000 - 40,000 - 10,000 - 6,000 = 24,000 $$

Question 20

Which of the following is an example of a liability?

Accepted Answer

Accounts Payable

Financial Accounting BSc Curriculum Syllabus and Topic Overview (3rd Semester 2025)

Guida di studio - Domande di pratica

Study guide - Flashcard