ACTG 244 FINAL EXAM QUESTIONS WITH VERIFIED
ANSWERS
It is normal for a building contractor to require about 50% cash up front (which is
unearned revenue) - Answers - false
The FASB, not the SEC has the power to set financial accounting reporting rules -
Answers - false
"assets" is the name of an account on the general ledger, which we might specifically
debit or credit - Answers - false
Account numbers, such as assets being in the 100-199 range and cash being account #
101, are determined by the FASB under the conceptual framework - Answers - false
The only way an expense can be incurred is if an asset is consumed - Answers - false
An increase in the dividend account would require a debit entry to the account -
Answers - true
Ongoing transactions posted to notes payable and accounts receivable during a period
would typically include both debit and credit entries - Answers - true
If inventory turnover is high, then account receivable turnover is likely to be low -
Answers - false
Vertical analysis of the income statement would facilitate comparing a larger company
with a smaller company - Answers - true
Horizontal analysis concerns trends across time - Answers - true
Sales revenue = $120
Cost of sales = 80
Gross margin = $40
What is the markup seen above? - Answers - 50%
What is the principle that a company must recognize revenue in the period in which it is
earned, and that it is not considered earned until a product or service has been
provided? - Answers - revenue recognition principle
Reasons that should influence the choice of straight-line versus accelerated
depreciation method include which of the following?
A. Accelerated depreciation is costly because it means paying more tax sooner
, B. Accelerated methods are not allowed under GAAP, but only for tax purposes
C. With the accelerated method, a salvage value cannot be considered
D. All of the above
E. None of the above - Answers - E. None of the above
On march 31, we recorded a month's depreciation expense on machinery, $1,500
The credit entry should go to... - Answers - accumulated depreciation, machinery
A certain set of ratios concern ability to cover long-term credit obligations. They are of
most interest to long-term lenders and equity holders. Which category are they? -
Answers - solvency
Another set of ratios concern ability to cover short-term credit obligations. The parties
most interested are short-term creditors like suppliers. Which category are they? -
Answers - liquidity
These ratios concern how well a company produces returns from its operations.
Stockholders and their managers are keenly interested. Which category are they? -
Answers - profitability
These ratios concern how well the business manages its key assets of accounts
receivable and inventory. Managers as well as stockholders are interested. Which
category are they? - Answers - efficiency
What does a gross margin ratio of 15% indicate? - Answers - not enough information to
answer
Riptide fashions sells stylish clothing. Their days of inventory on hand is 360. This
indicates that the company... - Answers - is likely in deep trouble
What is a cost? - Answers - a sacrifice of resources
Suppose that a company has fixed costs of $11 per unit and variable costs $6 per unit
when 10,000 units are produced. What are the total fixed costs? - Answers - 10,000 x
$11 = $110,000
Suppose that a company has fixed costs of $11 per unit and variable costs $6 per unit
when 10,000 units are produced. What are the total variable costs? - Answers - 10,000
x $6 = $60,000
Roper furniture manufacturing tracks cost data across their process. The following are
some of the costs that they incur. Select all that are variable costs (varying with units
produced)
A. Wood used to produce desks
B. Production labor used to produce desks ($15 per hour)
C. Production supervisor salary ($45,000 per year)
ANSWERS
It is normal for a building contractor to require about 50% cash up front (which is
unearned revenue) - Answers - false
The FASB, not the SEC has the power to set financial accounting reporting rules -
Answers - false
"assets" is the name of an account on the general ledger, which we might specifically
debit or credit - Answers - false
Account numbers, such as assets being in the 100-199 range and cash being account #
101, are determined by the FASB under the conceptual framework - Answers - false
The only way an expense can be incurred is if an asset is consumed - Answers - false
An increase in the dividend account would require a debit entry to the account -
Answers - true
Ongoing transactions posted to notes payable and accounts receivable during a period
would typically include both debit and credit entries - Answers - true
If inventory turnover is high, then account receivable turnover is likely to be low -
Answers - false
Vertical analysis of the income statement would facilitate comparing a larger company
with a smaller company - Answers - true
Horizontal analysis concerns trends across time - Answers - true
Sales revenue = $120
Cost of sales = 80
Gross margin = $40
What is the markup seen above? - Answers - 50%
What is the principle that a company must recognize revenue in the period in which it is
earned, and that it is not considered earned until a product or service has been
provided? - Answers - revenue recognition principle
Reasons that should influence the choice of straight-line versus accelerated
depreciation method include which of the following?
A. Accelerated depreciation is costly because it means paying more tax sooner
, B. Accelerated methods are not allowed under GAAP, but only for tax purposes
C. With the accelerated method, a salvage value cannot be considered
D. All of the above
E. None of the above - Answers - E. None of the above
On march 31, we recorded a month's depreciation expense on machinery, $1,500
The credit entry should go to... - Answers - accumulated depreciation, machinery
A certain set of ratios concern ability to cover long-term credit obligations. They are of
most interest to long-term lenders and equity holders. Which category are they? -
Answers - solvency
Another set of ratios concern ability to cover short-term credit obligations. The parties
most interested are short-term creditors like suppliers. Which category are they? -
Answers - liquidity
These ratios concern how well a company produces returns from its operations.
Stockholders and their managers are keenly interested. Which category are they? -
Answers - profitability
These ratios concern how well the business manages its key assets of accounts
receivable and inventory. Managers as well as stockholders are interested. Which
category are they? - Answers - efficiency
What does a gross margin ratio of 15% indicate? - Answers - not enough information to
answer
Riptide fashions sells stylish clothing. Their days of inventory on hand is 360. This
indicates that the company... - Answers - is likely in deep trouble
What is a cost? - Answers - a sacrifice of resources
Suppose that a company has fixed costs of $11 per unit and variable costs $6 per unit
when 10,000 units are produced. What are the total fixed costs? - Answers - 10,000 x
$11 = $110,000
Suppose that a company has fixed costs of $11 per unit and variable costs $6 per unit
when 10,000 units are produced. What are the total variable costs? - Answers - 10,000
x $6 = $60,000
Roper furniture manufacturing tracks cost data across their process. The following are
some of the costs that they incur. Select all that are variable costs (varying with units
produced)
A. Wood used to produce desks
B. Production labor used to produce desks ($15 per hour)
C. Production supervisor salary ($45,000 per year)
