Exam 1

Question 1

Calculate Debt Balance

Answer 1

(Total Liabilities) / (Total Assets)

Question 2

Calculate Current Ratio

Answer 2

(Total Current Assets) / (Total Current Liabilities)

Question 3

Calculate Working Capital

Answer 3

(Total Current Assets) - (Total Current Liabilities)

Question 4

sale of plant assets

Answer 4

investing

Question 5

buying and selling own stock

Answer 5

f

Question 6

Steps for completing a statement of cash flow

Answer 6

1. Read problem and especially take note of the “other info” section
2. Record transaction for any additional information (i.e. equipment)
3. Post revs and exps to the appropriate t-accounts
4. Find the other side of each rev and exp and label each one
5. Close all revs and exps to income summary
6. Close income summary to retained earnings
7. Reconcile all balance sheet accounts

Question 7

collections from customers

Answer 7

Operating

Question 8

collecting interest

Answer 8

operating

Question 9

receiving dividends

Answer 9

operating

Question 10

payments to suppliers

Answer 10

operating

Question 11

payments to employees

Answer 11

operating

Question 12

payments of taxes

Answer 12

operating

Question 13

payments of interest

Answer 13

operating

Question 14

sale of investments

Answer 14

investing

Question 15

cash receipt of loan principal

Answer 15

investing

Question 16

Acquisition of plant assets

Answer 16

investing

Question 17

acquisition of land

Answer 17

i

Question 18

acquisition of other investments

Answer 18

i

Question 19

lending money

Answer 19

i

Question 20

borrowing money

Answer 20

f

Question 21

payment of dividends

Answer 21

f

Question 22

payment of principal on debts

Answer 22

f

Question 23

3 things you must do to recognize revenue

Answer 23

1. seller has to put forth substantial effort
2. Implied or explicit agreement
3. The price needs to be known

Question 24

Purpose of adjusting entries

Answer 24

they allow us to record revenues and expenses in the proper period as well as modify the value of related assets and liabilities

Question 25

Matching concept

Answer 25

expenses should be recorded in the same time period that any revenue associated with those expenses is generated

Question 26

What group creates accounting standards?

Answer 26

FASB

Question 27

When do you recognize rev and exp in cash accounting?

Answer 27

when cash has come or gone; same time as cash flow

Question 28

When do you recognize rev and exp in accrual accounting?

Answer 28

When it is earned (economic performance)