Financial Accounting Practice Exam
1. An advantage of the corporate form of business is that:
A. It has limited life. B. Its owner’s personal resources are at stake. C. Its ownership is easily transferable via the sale of shares of stock. D. It is simple to establish. E. It has double taxation.
2. External users want answers to all of the following questions except:
A. Is the company earning satisfactory income? B. Will the company be able to pay its debts as they come due? C. Will the company be able to afford employee pay raises this year? D. How does the company compare in profitability with competitors?
3. The best definition of assets is the:
A. Cash owned by the company. B. Collections of resources belonging to the company and the claims to those resources. C. Owners’ investment in the business. D. Resources belonging to a company that have future benefit to the company.
4. Retained earnings at the end of the period is equal to:
A. Beginning retained earnings plus net income minus liabilities. B. Beginning retained earnings plus net income minus dividends. C. Net income. D. Assets plus liabilities. E. Assets minus liabilities.
5. Assume working capital is $45,000 and the current ratio is 4:1. What are current liabilities?
A. $ 10,000 B. $ 11,250 C. $ 15,000 D. $ 17,400 E. $ 180,000
6. Wolfpack, Inc. collected $6,250 on account. The effect of the transaction on the accounting equation is to:
A. Increase revenue and decrease expenses. B. Have no effect on total assets. C. Decrease assets and decrease liabilities. D. Increase assets and increase stockholder’s equity. E. Both A and B.
7. The retained earnings account has a debit balance of $2,400 before closing entries are made. If total revenues for the year are $57,200, total expenses are $36,800, and dividends are
A. It has limited life. B. Its owner’s personal resources are at stake. C. Its ownership is easily transferable via the sale of shares of stock. D. It is simple to establish. E. It has double taxation.
2. External users want answers to all of the following questions except:
A. Is the company earning satisfactory income? B. Will the company be able to pay its debts as they come due? C. Will the company be able to afford employee pay raises this year? D. How does the company compare in profitability with competitors?
3. The best definition of assets is the:
A. Cash owned by the company. B. Collections of resources belonging to the company and the claims to those resources. C. Owners’ investment in the business. D. Resources belonging to a company that have future benefit to the company.
4. Retained earnings at the end of the period is equal to:
A. Beginning retained earnings plus net income minus liabilities. B. Beginning retained earnings plus net income minus dividends. C. Net income. D. Assets plus liabilities. E. Assets minus liabilities.
5. Assume working capital is $45,000 and the current ratio is 4:1. What are current liabilities?
A. $ 10,000 B. $ 11,250 C. $ 15,000 D. $ 17,400 E. $ 180,000
6. Wolfpack, Inc. collected $6,250 on account. The effect of the transaction on the accounting equation is to:
A. Increase revenue and decrease expenses. B. Have no effect on total assets. C. Decrease assets and decrease liabilities. D. Increase assets and increase stockholder’s equity. E. Both A and B.
7. The retained earnings account has a debit balance of $2,400 before closing entries are made. If total revenues for the year are $57,200, total expenses are $36,800, and dividends are