C214 - Financial Management Exam Actual Questions with Complete Solution 2024/2025

C214 - Financial Management Exam Actual Questions with Complete Solution 2024/2025 Trading on the NYSE is executed without a specialist (i.e. a market maker). False Accruals are expenses a firm owes but hasn't paid yet. (Like wages - the employee has worked, but his check hasn't been cut yet.) Which of the following best describes the guiding principle for revenue recognition within accrual accounting system: Revenue is reported when the earnings process is complete 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: revenues of $300,000 and expenses of $300,000. revenues of $500,000 and expenses of $300,000. revenues of $500,000 and expenses of $200,000. Revenues of $500,000 and expenses of $300,000. Solution: Under accrual accounting system, you record the revenues when the earnings process is complete and match the expense with the revenues. In this case, we delivered the product and have a contract for payment with a high-quality firm. Hence, the earnings process is complete (including reasonable assurance of payment) so the firm will recognize $500,000 in revenue. On the balance sheet, Gross Fixed Assets represent: The original cost of the fixed assets currently owned by the firm. A firm purchased equipment three years ago for $500,000. The equipment is the only fixed asset the firm has ever owned. If the firm claimed depreciation of $20,000 the first year, $35,000 the second year and $32,500 the third year, the Gross Fixed Assets should be equal to: $445,000 $480,000 $500,000 $412,000 $500,000 Solution: GROSS fixed assets represent the original cost of the firm's fixed assets before accumulated depreciation