1.

Which of the following statements is the rationale for the accounting equation?

a.The value of the firm's assets must equal the total amount of financing used to purchase assets.

b.The value of a firm's assets must always be greater than the total amount of financing to purchase those assets.

c.The firm can calculate its profit margin by subtracting expenses and liabilities from revenue.

d.A firm's financial worth is calculated by subtracting the assets from shareholder equity.

2.

ABC Inc.'s Balance Sheet appears to understate the true value of its long-term assets. What is the likely reason?

1. ABCs balance sheet shows land at the original purchase price
2. ABCs balance sheet shows land at current market price
3. ABCs balance sheet shows all its economic assets
4. ABCs balance sheet shows market price per share

3.

What is the earnings per share of a company that has $1,000 in revenue, $400 of expenses, and 20 outstanding shares of stock?

a. 30

b. 1

c. 20

d. 50

4.

If I borrowed the money to buy the asset then the source of financing is considered equity. On the other hand, if the money was invested by owners, I say liability was the source of money to buy the asset.

T/F

5.

Which is an example of a bookkeeping system?

A.Recording how much money you spend on gas every month

B. Going to the gym to make your membership payment

C. Making a weekly grocery list

D. Paying all your bills online

6.

What is the primary asset of any bank?

A. Checking and savings accounts

B. Investments

C. Accounts receivable

D. Real estate