C214 Study Guide Question and
answers rated A+ 2026
1. Trading on the NYSE is executed without a specialist (i.e. a market maker). (T or F) - correct answer
✔1. False.
2. Stocks and bonds are two types of financial instruments (T or F) - correct answer ✔2. True.
3. The matching principle in accrual accounting requires that:
a. Revenues be recognized when the earnings process is complete and matches expenses to revenues
recognized.
b. Expenses are matched to the year in which they are incurred
c. Revenues are matched to the year in which they are booked
d. Revenues should be large enough to match expenses - correct answer ✔3. a. Revenues be
recognized when the earnings process is complete and matches expenses to revenues recognized.
4. A high-quality customer just purchased $500,000 worth of product from your company. The contract
calls for immediate delivery of the product with a cash payment of $300,000 today and $200,000 to be
paid 60 days. The expense associated with the product is $300,000, of which $100,000 has not been
paid to your supplier. Under accrual based accounting system, you will most likely report:
a. revenues of $300,000 and expenses of $300,000.
b. revenues of $300,000 and expenses of $200,000.
c. revenues of $500,000 and expenses of $300,000.
d. revenues of $500,000 and expenses of $200,000. - correct answer ✔c. revenues of $500,000 and
expenses of $300,000.
,5. A firm reported retained earnings of $300 in 12/31/20x2. For 12/31/20x3, the firm reports retained
earnings of $400 and pays dividends of $25. What was net income in 20x3?
a. 300
b. 400
c. 125
d. 100 - correct answer ✔c. Net income = 400 - 300 + 25 = 125.
6. The basic equation for the balance sheet is:
a. Equity = Assets - Liabilities
b. Liabilities = Equity + Assets
c. Assets = Liabilities - Equity
d. Assets = Equity - Liabilities - correct answer ✔a. Equity = Assets - Liabilities.
7. Intel reported the following for 2014:
Net Income 100,000
Depreciation 20,000
Change in A/R 10,000
What is the cash flow from operating activities
a. 100,000
b. 110,000
c. 120,000
d. (130,000) - correct answer ✔b. CFO = 100,000 + 20,000 - 10,000 = 110,000.
8. Intel reported the following for 2014:
, Gross Equipment (1/1/14) 50,000
Gross Equipment (12/31/14) 65,000
Net income 100,000
Depreciation 20,000
What is the cash flow from investing activities for 2014
a. 100,000
b. 80,000
c. 15,000
d. (15,000) - correct answer ✔d. CFI = 50,000 - 65,000 = -15,000.
9. Last year a firm recorded Net PP&E of $4,600 while this year the same firm recorded Net PP&E of
$4,500. If the depreciation expense for last year and this year are $500 and $800 respectively, what is
the CFI of the company? (assume no asset disposals)
a. 100 outflow
b. 900 outflow
c. 100 inflow
d. 700 outflow - correct answer ✔d. CFI = 4,600 - 4,500 - 800 = - 700, 700 outflow.
10. The statement of cash flows
a. serves as the replacement for the income statement and balance sheet
b. explains the change in cash balance at one point in time
c. explains the change in cash balance for one period of time
d. both (a) and (b) above - correct answer ✔c. explains the change in cash balance for one period of
time.
answers rated A+ 2026
1. Trading on the NYSE is executed without a specialist (i.e. a market maker). (T or F) - correct answer
✔1. False.
2. Stocks and bonds are two types of financial instruments (T or F) - correct answer ✔2. True.
3. The matching principle in accrual accounting requires that:
a. Revenues be recognized when the earnings process is complete and matches expenses to revenues
recognized.
b. Expenses are matched to the year in which they are incurred
c. Revenues are matched to the year in which they are booked
d. Revenues should be large enough to match expenses - correct answer ✔3. a. Revenues be
recognized when the earnings process is complete and matches expenses to revenues recognized.
4. A high-quality customer just purchased $500,000 worth of product from your company. The contract
calls for immediate delivery of the product with a cash payment of $300,000 today and $200,000 to be
paid 60 days. The expense associated with the product is $300,000, of which $100,000 has not been
paid to your supplier. Under accrual based accounting system, you will most likely report:
a. revenues of $300,000 and expenses of $300,000.
b. revenues of $300,000 and expenses of $200,000.
c. revenues of $500,000 and expenses of $300,000.
d. revenues of $500,000 and expenses of $200,000. - correct answer ✔c. revenues of $500,000 and
expenses of $300,000.
,5. A firm reported retained earnings of $300 in 12/31/20x2. For 12/31/20x3, the firm reports retained
earnings of $400 and pays dividends of $25. What was net income in 20x3?
a. 300
b. 400
c. 125
d. 100 - correct answer ✔c. Net income = 400 - 300 + 25 = 125.
6. The basic equation for the balance sheet is:
a. Equity = Assets - Liabilities
b. Liabilities = Equity + Assets
c. Assets = Liabilities - Equity
d. Assets = Equity - Liabilities - correct answer ✔a. Equity = Assets - Liabilities.
7. Intel reported the following for 2014:
Net Income 100,000
Depreciation 20,000
Change in A/R 10,000
What is the cash flow from operating activities
a. 100,000
b. 110,000
c. 120,000
d. (130,000) - correct answer ✔b. CFO = 100,000 + 20,000 - 10,000 = 110,000.
8. Intel reported the following for 2014:
, Gross Equipment (1/1/14) 50,000
Gross Equipment (12/31/14) 65,000
Net income 100,000
Depreciation 20,000
What is the cash flow from investing activities for 2014
a. 100,000
b. 80,000
c. 15,000
d. (15,000) - correct answer ✔d. CFI = 50,000 - 65,000 = -15,000.
9. Last year a firm recorded Net PP&E of $4,600 while this year the same firm recorded Net PP&E of
$4,500. If the depreciation expense for last year and this year are $500 and $800 respectively, what is
the CFI of the company? (assume no asset disposals)
a. 100 outflow
b. 900 outflow
c. 100 inflow
d. 700 outflow - correct answer ✔d. CFI = 4,600 - 4,500 - 800 = - 700, 700 outflow.
10. The statement of cash flows
a. serves as the replacement for the income statement and balance sheet
b. explains the change in cash balance at one point in time
c. explains the change in cash balance for one period of time
d. both (a) and (b) above - correct answer ✔c. explains the change in cash balance for one period of
time.
