Q: Which of the following best represents the fundamental accounting equation?

$$\text{Assets} = \text{Liabilities} + \text{Owner's Equity}$$

Q: A company purchased equipment for $50,000 cash. How does this transaction affect the accounting equation?

$$\text{Assets unchanged}, \text{Liabilities unchanged}, \text{Owner's Equity unchanged}$$

Q: A company purchased inventory for $10,000 on account. What is the effect on the accounting equation?

$$\text{Assets increase}, \text{Liabilities increase}, \text{Owner's Equity unchanged}$$

Q: A company declared a cash dividend of $10,000. What is the effect on the accounting equation at the declaration date?

$$\text{Assets unchanged}, \text{Liabilities increase}, \text{Stockholders' Equity decrease}$$

Question 1

Which of the following best represents the fundamental accounting equation?

Accepted Answer

$$	ext{Assets} = 	ext{Liabilities} + 	ext{Owner's Equity}$$

Question 2

A company purchased equipment for $50,000 cash. How does this transaction affect the accounting equation?

Accepted Answer

$$	ext{Assets unchanged}, 	ext{Liabilities unchanged}, 	ext{Owner's Equity unchanged}$$

Question 3

Which financial statement reports a company's financial position at a specific point in time?

Accepted Answer

Balance Sheet

Question 4

If a company has total assets of $$250,000, total liabilities of 100$$,000, and total revenues of $300,000, what is the amount of owner's equity?

Accepted Answer

$$150,000$$

Question 5

Which of the following is NOT a characteristic of a corporation?

Accepted Answer

Mutual agency

Question 6

A company purchased inventory for $10,000 on account. What is the effect on the accounting equation?

Accepted Answer

$$	ext{Assets increase}, 	ext{Liabilities increase}, 	ext{Owner's Equity unchanged}$$

Question 7

Which of the following transactions would NOT affect cash during a period?

Accepted Answer

Write-off of an uncollectible account

Question 8

A company had credit sales of $$620,000 and cash sales of 210$$,000. If 2% of credit sales are estimated to be uncollectible, what amount should be recorded as bad debt expense?

Accepted Answer

$$12,400$$

Question 9

Which inventory costing method is most appropriate for a company with unique, high-value inventory items?

Accepted Answer

Specific Identification

Question 10

A company issued $100,000, 5-year bonds at 92. What is the amount of discount on bonds payable?

Accepted Answer

$$8,000$$

Question 11

Which of the following is included in the quick (acid-test) ratio calculation?

Accepted Answer

Accounts receivable

Question 12

If a company purchases treasury stock, what is the effect on stockholders' equity?

Accepted Answer

Stockholders' equity decreases

Question 13

Which of the following is NOT an objective of internal control?

Accepted Answer

Maximize profits

Question 14

A company had a beginning inventory of $$2,000, ending inventory of 3$$,400, net sales of $$54,000, and net purchases of 13$$,000. What is the cost of goods sold?

Accepted Answer

$$11,600$$

Question 15

Which of the following accounts is a temporary account?

Accepted Answer

Dividends

Question 16

A company issued 1,200 shares of $$1 par value common stock for 7$$,200. What is the journal entry to record this transaction?

Accepted Answer

Debit Cash $$7,200$$, Credit Common Stock $$1,200$$, Credit Paid-In Capital in Excess of Par $$6,000$$

Question 17

Which of the following is NOT reported as a cash flow from operating activities?

Accepted Answer

Issuance of common stock

Question 18

Which depreciation method results in higher depreciation expense in the early years of an asset's life?

Accepted Answer

Double declining balance method

Question 19

A company declared a cash dividend of $10,000. What is the effect on the accounting equation at the declaration date?

Accepted Answer

$$	ext{Assets unchanged}, 	ext{Liabilities increase}, 	ext{Stockholders' Equity decrease}$$

Question 20

Which of the following is a purpose of the statement of cash flows?

Accepted Answer

To provide information about cash receipts and cash payments during a period

Financial Accounting Final Exam Comprehensive Study Guide

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