ACCT 102 FINAL EXAM WITH QUESTIONS AND CORRECT ANSWERS
what is a scenario where a business is liquid but not solvent? - ans... -a well-
capitalized firm is operating in a declining industry it will not remain solvent as its
cash will be drained over time and the company will end up out of business.
quick ratio equation - ans... - (current assets - inventory) / current liabilities
which is a better measure of liquidity: current ratio or quick? - ans... -quick
what would result in a higher-than-average current ratio but lower than average
quick? - ans... -- the firm operates at the high end of the market
- sales managers are not doing a good job
- sales managers are anticipating supply problems and decide to increase stock
safety levels
what is the interest coverage ratio equation and what does it show? - ans... -
earnings before interest and tax/interest expense
shows if you have enough cash to pay off interest on long term loans.
what is the benefit of leverage? - ans... -it enables you to gain a large exposure to a
financial asset using only a small amount of your capital. making money with
borrowed money.
what are the two leverage ratios? - ans... -debt ratio: non-current liabilities/ total
assets
debt to equity ratio: non-current liabilities/ total equity
are salary allowances made before or after the profit is appropriated for a
partnership? where is this recorded? - ans... -before, at the end of the income
statement
what does the partner's equity ledger include? - ans... -any drawings, salary
allowances and profit sharing that is done throughout the financial year
true or false: a partnership is not a legal entity. - ans... -true
,true or false: a partnership obtains further to a legally binding arrangement among
partners. - ans... -true
true or false: for a legally binding arrangement among partners to exist, a written
document must be executed by the partners and then publically registered. - ans... -
false
true or false: in a typical new zealand partnership, each partner takes responsibility
for the business actions of all other partners. - ans... -true
which inventory system updates on a continuous basis with cogs being readily
available and reported on the income statement - ans... -perpetual system
which inventory system is updated at year end only and cogs are calculated after a
physical stock take - ans... -periodic system
what are the four inventory cost flow methods? - ans... -1. specific identification
approach
2. first-in, first-out approach
3. last-in, first-out approach
4. average cost approach
what are the most appropriate inventory system and inventory cost flow methods
for the following businesses?
a) co-op bookshop
b) local petrol station
c) antique shop
d) bottled juice in a fruit bar
e) jewellery - ans... -a) perpetual & fifo
b) perpetual & moving average cost
c) periodic & specific identification approach
d) perpetual & fifo
e) either & specific identification approach
under inflation which yields higher profits? lifo or fifo? - ans... -fifo
why is fifo a better valuation approach? - ans... -it provides a measure of inventory
value that is closer to the market value
inventory turnover equation - ans... -cogs/average inventory
,inventory turnover period equation - ans... -365/inventory turnover
closing inventory equation - ans... -opening inventory + purchases - cogs
what factors result in the bank balance not matching the bank t-account - ans... --
bank fees and interest
- unpresented cheques issued by the firm
- deposits in transit
- errors
what is corporate governance? - ans... -the system of governing a company so that
the interests of corporate owners and other stakeholders are protected
what does erp stand for?
a. enterprise resource planning
b. entry resourceful pages
c. entry regular planner
d. none of the above - ans... -a
what is a subsidiary ledger? - ans... -a group of similar accounts whose combined
balances equal the balance in a specific general ledger account. e.g accounts
receivable
what is a special journal? - ans... -a journal used to record only one kind of
transaction e.g sales journal
what are the characteristics of a legal entity? - ans... -- can enter agreements or
contracts
- assume obligations
- incur and pay debts
- sue and be sued
- accountable for illegal activities
what are some examples of legal entities that are not accounting entities - ans... --
individuals who are adult and sane
- the state
- criminal organisations
, what can an accounting entity do? - ans... -- engage in economic activity
- control economic resources for which accounting records exist
- is distinct from the dealings of those who control it
what are some accounting entities that are not legal entities? - ans... -- sole
proprietorships
- a company division/ department
- some government entities e.g nz dhbs
what are some both legal and accounting entities? - ans... -- for-profit companies
- non-profit companies
- trusts
what is limited liability? - ans... -the condition by which shareholders are legally
responsible for the debts of a company only to the extent of the nominal value of
their shares.
what is unlimited liability? - ans... -complete legal responsibility for all debts and
damages arising from doing business
how is profit referred for non-profit entities? - ans... -as surplus or deficit
who are sole traders? - ans... -people who start in business on their own without
registering as a company.
how do sole traders collect profits from their business?
a) through a salary
b) through wages
c) through drawings
d) through making withdraws against profit - ans... -d)
what is a partnership? - ans... -an entity structure where 2 or more individuals co-
operate for the sake of generating a financial profit
are partnerships accounting or legal entities or both? - ans... -accounting entities
do partnerships have limited liability? - ans... -no- they have unlimited liability
what is a scenario where a business is liquid but not solvent? - ans... -a well-
capitalized firm is operating in a declining industry it will not remain solvent as its
cash will be drained over time and the company will end up out of business.
quick ratio equation - ans... - (current assets - inventory) / current liabilities
which is a better measure of liquidity: current ratio or quick? - ans... -quick
what would result in a higher-than-average current ratio but lower than average
quick? - ans... -- the firm operates at the high end of the market
- sales managers are not doing a good job
- sales managers are anticipating supply problems and decide to increase stock
safety levels
what is the interest coverage ratio equation and what does it show? - ans... -
earnings before interest and tax/interest expense
shows if you have enough cash to pay off interest on long term loans.
what is the benefit of leverage? - ans... -it enables you to gain a large exposure to a
financial asset using only a small amount of your capital. making money with
borrowed money.
what are the two leverage ratios? - ans... -debt ratio: non-current liabilities/ total
assets
debt to equity ratio: non-current liabilities/ total equity
are salary allowances made before or after the profit is appropriated for a
partnership? where is this recorded? - ans... -before, at the end of the income
statement
what does the partner's equity ledger include? - ans... -any drawings, salary
allowances and profit sharing that is done throughout the financial year
true or false: a partnership is not a legal entity. - ans... -true
,true or false: a partnership obtains further to a legally binding arrangement among
partners. - ans... -true
true or false: for a legally binding arrangement among partners to exist, a written
document must be executed by the partners and then publically registered. - ans... -
false
true or false: in a typical new zealand partnership, each partner takes responsibility
for the business actions of all other partners. - ans... -true
which inventory system updates on a continuous basis with cogs being readily
available and reported on the income statement - ans... -perpetual system
which inventory system is updated at year end only and cogs are calculated after a
physical stock take - ans... -periodic system
what are the four inventory cost flow methods? - ans... -1. specific identification
approach
2. first-in, first-out approach
3. last-in, first-out approach
4. average cost approach
what are the most appropriate inventory system and inventory cost flow methods
for the following businesses?
a) co-op bookshop
b) local petrol station
c) antique shop
d) bottled juice in a fruit bar
e) jewellery - ans... -a) perpetual & fifo
b) perpetual & moving average cost
c) periodic & specific identification approach
d) perpetual & fifo
e) either & specific identification approach
under inflation which yields higher profits? lifo or fifo? - ans... -fifo
why is fifo a better valuation approach? - ans... -it provides a measure of inventory
value that is closer to the market value
inventory turnover equation - ans... -cogs/average inventory
,inventory turnover period equation - ans... -365/inventory turnover
closing inventory equation - ans... -opening inventory + purchases - cogs
what factors result in the bank balance not matching the bank t-account - ans... --
bank fees and interest
- unpresented cheques issued by the firm
- deposits in transit
- errors
what is corporate governance? - ans... -the system of governing a company so that
the interests of corporate owners and other stakeholders are protected
what does erp stand for?
a. enterprise resource planning
b. entry resourceful pages
c. entry regular planner
d. none of the above - ans... -a
what is a subsidiary ledger? - ans... -a group of similar accounts whose combined
balances equal the balance in a specific general ledger account. e.g accounts
receivable
what is a special journal? - ans... -a journal used to record only one kind of
transaction e.g sales journal
what are the characteristics of a legal entity? - ans... -- can enter agreements or
contracts
- assume obligations
- incur and pay debts
- sue and be sued
- accountable for illegal activities
what are some examples of legal entities that are not accounting entities - ans... --
individuals who are adult and sane
- the state
- criminal organisations
, what can an accounting entity do? - ans... -- engage in economic activity
- control economic resources for which accounting records exist
- is distinct from the dealings of those who control it
what are some accounting entities that are not legal entities? - ans... -- sole
proprietorships
- a company division/ department
- some government entities e.g nz dhbs
what are some both legal and accounting entities? - ans... -- for-profit companies
- non-profit companies
- trusts
what is limited liability? - ans... -the condition by which shareholders are legally
responsible for the debts of a company only to the extent of the nominal value of
their shares.
what is unlimited liability? - ans... -complete legal responsibility for all debts and
damages arising from doing business
how is profit referred for non-profit entities? - ans... -as surplus or deficit
who are sole traders? - ans... -people who start in business on their own without
registering as a company.
how do sole traders collect profits from their business?
a) through a salary
b) through wages
c) through drawings
d) through making withdraws against profit - ans... -d)
what is a partnership? - ans... -an entity structure where 2 or more individuals co-
operate for the sake of generating a financial profit
are partnerships accounting or legal entities or both? - ans... -accounting entities
do partnerships have limited liability? - ans... -no- they have unlimited liability
