Question 1

The goal of financial accounting is:

1 point

To provide information to decision makers

To calculate (and minimize) taxes owed

To accurately reflect the current market value of all items owned

To make work for accountants

2.

Question 2

Accounting was created

1 point

Independently across many ancient societies as a tool to organize as economies became more complicated

In 18th century Britain as a tool of the trading companies

In 16th century Italy as a tool of the newly wealthy merchant class

Around the same time as the computer. Accounting has become more complicated as computer abilities have grown.

3.

Question 3

"Where do we stand at a given point in time?" is one of the two big questions in life. Which financial statement was created to answer this question?

1 point

The balance sheet

The income statement

The cash flow statement

4.

Question 4

Accrual accounting is designed to

1 point

Provide companies with a tool for computing taxes

Record an economic event in the period in which it occurs

Reflect the current value of all items owned or owed by the organization

5.

Question 5

Athena firm started the year with retained earnings of $1,300,000. Their net income during the year was $250,000. They paid dividends of $25,000. They also borrowed $100,000 that they will have to pay next year. How much is retained earnings at the end of the year?

(Note - for all questions asking for numerical answers, write the number only, no dollar sign ($))

1 point

6.

Question 6

If assets go down and stock holders equity stays the same, what must have happened to liabilities?

1 point

It went down

It stayed the same

It went up

We cannot tell

7.

Question 7

If Kirsten's boss ask her how much the company spent on the inventory they sold this year, she should look at the

1 point

Cash flow statement

Income statement

Balance sheet

8.

Question 8

If Luis' boss ask him how much their competitors raised in financing last year, he should look at the

1 point

Balance sheet

Cash flow statement

Income statement

9.

Question 9

If Iullia's boss asked her how much they owed to vendors, she should look at the

1 point

Balance sheet

Cash flow statement

Income statement

10.

Question 10

Which are criteria of revenue recognition

1 point

Customer signs an agreement that goods were delivered

Earned

Realized or Realizable

Items to be sold are completely built

11.

Question 11

Caroline has a retail bike company called "One Price Bike". She charges $100 for each bike. In one week, she has four customers who purchase bikes by paying cash and taking the bikes immediately. Another customers pays for a bike, but says they will come in next week to pick it up on their child's birthday. There are also two customers who take bikes, but have not yet paid. They both are trying the bikes out and will either pay next week or return the bike. Caroline knows that about 50% of the people end up buying the bike after a week trail.

How much should Caroline recognize in revenue for this week?

1 point

12.

Question 12

Kelly owns a catering company that focuses on burritos. She provides clients with food and bills them later. At the end of the year she is owed $70,000, but believes there are about $4,000 she will not be paid. What amount should she report on the face of her financial statements?

1 point

$74,000

$66,000

$70,000

13.

Question 13

At the beginning of the year, a company had $80,000 in its allowance for doubtful accounts and $9,000,000 in accounts receivable. During the year they had $23,000,000 in credit sales. By the end of the year, they had $9,700,000 in accounts receivable and believed they would not collect $92,000 of it. Assuming there were no write offs or other items to impact the allowance for doubtful accounts, what would bad debt expense be for the current year?

1 point

14.

Question 14

Renata inc. had their year end on December 31. At that time they were owed accounts receivable of $970,000 and had an allowance for doubtful accounts of $21,000. On January 3rd they were notified that one of their customers had gone bankrupt and would not be paying the $3,200 they owed Renata. By how much will this transaction decrease the accounts receivable balance Renata shows on their balance sheet?

1 point

15.

Question 15

The inventory method applied by a firm should be

1 point

applied consistently from year to year, but does not have to match actual flow.

the method that most closely approximates the physical flow in the year being reported.

the one used by most firms in their industry

16.

Question 16

Hiroaki is calculating costs of goods sold for his company. They sell toasters. He spent $4,000 on raw material, paid employees who built the toasters $7,000, spent $5,000 on advertising and had depreciation of $1,000 on a machine used to build the toasters. How much should he report as his costs of goods sold?

1 point

17.

Question 17

Paula owns a company that distributes products to coffee shops. This is her second year of operations. At the beginning of the year, she had 120 pounds of coffee that cost $15 each. She purchased 200 pounds of coffee during the year, but the cost increased to $20. At the end of the year she had 130 pounds left. How much would cost of goods sold be if she used LIFO inventory method?

1 point

18.

Question 18

Paula owns a company that distributes products to coffee shops. This is her second year of operations. At the beginning of the year, she had 120 pounds of coffee that cost $15 each. She purchased 200 pounds of coffee during the year, but the cost increased to $20. At the end of the year she had 130 pounds left. How much would the inventory balance be if she used LIFO inventory method?

1 point

19.

Question 19

Matthew purchased a new motorcycle for his delivery company. It cost him $12,000. He spent $2,000 more to add storage bags and have it painted with his company colors. It is a high quality bike that will last 14 years. However, Matthew intends to sell it to an employee after 5 years. He believes it will still be worth $4,000 and views this as an easy way to make an employee happy. He purchased the bike on the first day of the year. How much depreciation expense would he recognize at the end of the year? You can assume he uses straight-line depreciation.

1 point

20.

Question 20

Matthew also owns a truck that he purchased three years ago. He plans to depreciate it over 6 years. At the time of purchase, he believed he would be able to resell the truck for $10,000. He still thinks that is correct (that is about what 6 year old trucks are selling for now). However, his current book value is $18,000 and he was surprised to see that similar trucks are only selling for $16,000. How much additional depreciation expense should Matthew take this year? Assume he uses straight line depreciation.

1 point

21.

Question 21

Emily purchased a tractor for her farm four years ago. She paid $100,000 for it, planned to use it for 10 years and then to sell it $20,000. However, she has now decided to plow using Oxen as part of a bioorganic certification. It will take her two years to train the Oxen, and then she plans to sell the tractor. She believes she will be able to sell it for $35,000 at that time. How much depreciation expense should she recognize in the fifth year of use?

1 point

22.

Question 22

Joshua purchased an airplane 12 years ago. He paid $1,200,000 for the airplane. The last day of the current year he sold the plane, which had $800,000 in accumulated depreciation. He received $430,000 in cash. What impact does this sale have on his income statement for this year? Feel free to ignore taxes (as we have the entire course).

1 point

$30,000 gain, which creates $30,000 more in net income

$0 on income statement, but retained earnings increases by $30,000

$30,000 loss, which creates $30,000 less net income

23.

Question 23

A loss on the sale of an item indicates

1 point

Management is bad a negotiating deals.

Management over depreciated the item over its life.

Management owes more money to the company that sold them the item.

Management under depreciated the item over its life.

24.

Question 24

Depreciation and amortization are conceptually similar expenses.

1 point

True

False

25.

Question 25

Which is not part of the definition of an asset?

1 point

Probable future economic benefit

Under the firm's control

From a past transaction

Tangible in nature

26.

Question 26

Tocoa corp. purchases a new company for $1,000,000 in cash. The company has liabilities listed on their books for $600,000, but Tocoa believes the fair value of the liabilities is actually $550,000. The company had assets with a bookvalue of $800,000, which Tocoa believes would cost $900,000 if purchased separately. How much, if any, goodwill does Tocoa recognize for this transaction?

1 point

27.

Question 27

Tocoa had purchased another company 3 years ago. That purchase has been very successful and Tocoa has grown their sales each year. The purchase had included $400,000 of goodwill. Tocoa believes that most of her acquisitions payoff for at least 20 years. How much goodwill amortization should she recognized for this year?

1 point

28.

Question 28

Egge corp. sells souvenirs for exotic locations. A toy Komodo dragon has been a top seller for several years, selling for $25 each. Egge only paid $15 per unit, so this was a nice mark up. Unfortunately, new restrictions on how close visitors can get to take pictures has reduced interest. While the Egge corp believes they will be able to sell the 1,000 units they have in stock by shipping to toy stores, they will have to spend $2 per unit for shipping on average and sell the toys for $13. How much, if any, of a charge should Egge corp. take in their current year financial statements?

1 point

29.

Question 29

Egge corp. also sells a replica of the lost city of Petra in Jordan. She has been selling them for $50 and they only cost $20 to make. She has been able to sustain such a large mark up because she was the only company to make the replicas with Jordan dirt as one input. However, a competitor has now come into the market and she can only sell her replicas for $30 now. How much, if any, of a charge should she take in the current year financial statements?

1 point

30.

Question 30

Taylor corp. pays employees the 1st of each month for work performed the prior month. At the end of September, Taylor owes its accounting and legal employees $130,000. How will this impact Taylor's month end financial statements?

1 point

Liabilities will increase by $130,000, Retained Earnings will decrease by $130,000 and Expenses will increase by $130,000

Assets will decrease by $130,000, Expenses will increase by $130,000 and Retained Earnings will decrease by $130,000.

Retained earnings will decrease by $130,000 and Expenses will increase by $130,000.

31.

Question 31

Doran company had an accident with its delivery truck at the end of the quarter. The accident caused a fire that burnt down a building housing restaurant and dry cleaner near Dorian's plant. Contractors have predicted it will cost $1,000,000 to replace the restaurant due to the need to clear away the wreckage from the old building and create new foundation. However, there is some chance the new foundation can be salvaged, which would reduce the cost to $900,000. There is also a chance that the fire caused toxic chemicals in the dry cleaner to spread across the site. That would require an additional $400,000 in clean up costs.

Dorian intends to challenge their liability in court. They will argue the building was constructed wrong. However, their attorneys tell them it is probable they will have to pay. How much, if any, liability should Dorian include on their financial statements?

1 point

32.

Question 32

Doran also had a gasoline spill while filling their delivery trucks. A small amount of the gasoline leaked into the lot outside their warehouse, potentially draining into the wetlands. Another firm which had a large chemical leak into the wetlands had spent $750,000 to clean them last year. Doran has small gas leaks on a regular basis and view them as a normal part of their business. They have never had to pay for any clean up in the past. Dorian should:

1 point

Disclose the potential of a clean up in the notes to their financial statements, but they do not need to take a charge at this point.

Record a liability and expense of $750,000 in this period.

Do nothing, it is a normal part of business and not a concern.

33.

Question 33

Chartreuse corp, issued 5,000 shares of stock for $50,000. The stock has a par value of $1. Dandelion corp also issued 5,000 shared of stock for $50,000 for no par value. Economically these two transactions are:

1 point

Very similar. The par value difference does not really change anything.

Different because Chartreuse corp is not allowed to invest $5,000 of its proceeds. Instead, they must stay in a liquid form such as cash.

Different because Dandelion corp shareholders may request their entire amount back on demand, while Chartreuse corp will always be able to retain the $5,000 par value.

34.

Question 34

Lucinda corp held treasury stock it had purchased for $75,000. It recently resold the stock for $90,000. Lucinda's will reflect the impact of this transaction on their financial statements by

1 point

increasing paid in capital in their equity accounts by $15,000

recognizing a gain on their income statement for $15,000 and a corresponding increase in retained earnings

Increasing retained earnings by $15,000, but no impact on the income statement

increasing paid in capital in their equity accounts by $90,000

35.

Question 35

In the same year, Lucinda corp made another sale of treasury stock, this time for $50,000. They had paid $60,000 for the stock. Lucinda's will reflect the impact of this transaction on their financial statements by

1 point

Decreasing paid in capital in their stock holders equity accounts by $10,000

Recognizing a loss of $10,000 on the income statement and a related $10,000 in retained earnings

Decreasing retained earnings by $10,000 with no impact on the income statement

36.

Question 36

Gupta inc. paid $1,500 in interest this year on its debt. Which section of the cash flow statement is impacted by this transaction?

1 point

Cash from Investing

Cash from Operations

Cash from Financing

37.

Question 37

Gupta, inc. also issued new debt this year. In which section of the cash flow statement would the debt be reflected.

1 point

Cash from financing

Cash from investing

Cash from operations

38.

Question 38

The same year, Gupta corp settled a lawsuit, paying out $50,000 (and still believing they were not at fault). In which section of the cash flow statement would the debt be reflected.

1 point

Cash from investing

Cash from operations

Cash from financing

39.

Question 39

Gupta inc, also purchased a large piece of machinery for $300,000 in cash (I said it was a large piece of machinery) . In which section of the cash flow statement would the debt be reflected?

1 point

Cash from operations

Cash from investing

Cash from financing

40.

Question 40

Lu inc, had a total change in cash of $18,000. Their cash from financing was $7,000, their cash from investing was negative $40,000. How much was their cash from operations?

1 point

41.

Question 41

Luu inc. uses the indirect cash flow statement applying the changes in working capital approach. They show change in accounts receivable as a $450,000 positive reconciling item. Assuming all transactions in accounts receivable were related to working capital accounts, that means that accounts receivable on the balance sheet:

1 point

Increased by $450,000

They are not really related. The balance sheet is accrual accounting, the cash flow statement is cash based.

Decreased by $450,000

42.

Question 42

The most important thing part to using ratios is

1 point

To not skew it due to your own preferences

To think

To make sure the accounting information is certified

To make sure the ratio you use can be defended by an outside source like a textbook or company policy

43.

Question 43

Vagisha is interested in understanding whether managers in the firm she invested in have made good use of her money this year. This would best be addressed by a ratio structured as:

1 point

Stock/Flow

Flow/Flow

Flow/Stock

Stock/Stock

44.

Question 44

Cody has also invested in company. He notices they do really well at sales, but is wondering how much they manage to keep for him as an owner. This would best be addressed by a ratio structured as:

1 point

Stock/Flow

Flow/Stock

Flow/Flow

Stock/Stock

45.

Question 45

Once you have the right ratio, you don't have to understand accounting

1 point

True

False

46.

Question 46

Now that you have completed this course, how comfortable are you with using accounting information? Do you view accounting differently than before?

5 points

Your answer cannot be more than 10000 characters.