Acct 301A Exam 1 CSUF- Questions with
Complete Solutions
Trial balance purpose Correct Ans-To verify that total debits equal total credits in the
accounting system.
Earnings per share (EPS) Correct Ans-EPS is calculated by (Net Income - Preferred
Dividends) / Weighted Average Number of Common Shares Outstanding.
Purpose of the statement of cash flows Correct Ans-To provide information about a
company's cash receipts and cash payments during a period.
Categories of business activities in the statement of cash flows Correct Ans-Operating,
investing, and financing.
Simple interest vs. compound interest Correct Ans-Simple interest is calculated on the
principal alone, while compound interest is calculated on both the principal and previously
earned interest.
Five-step revenue recognition model Correct Ans-1) Identify the contract, 2) Identify
performance obligations, 3) Determine transaction price, 4) Allocate transaction price, 5)
Recognize revenue when performance obligation is satisfied.
Deferred annuity Correct Ans-An annuity in which payments begin at a future date.
, Cash flows involved in bond valuation Correct Ans-Periodic interest payments (annuity) and
the principal repayment (single sum).
Liquidity measurement Correct Ans-The company's ability to meet short-term obligations,
measured by the current cash debt coverage ratio.
Free cash flow formula Correct Ans-Net cash provided by operating activities - capital
expenditures - cash dividends.
Normal balances for asset and expense accounts Correct Ans-Debit.
Normal balances for liabilities, equity, and revenue accounts Correct Ans-Credit.
Accrual basis of accounting Correct Ans-Revenue is recorded when earned, and expenses are
recorded when incurred, regardless of when cash is received or paid.
Role of SEC, FASB, AICPA, and IASB Correct Ans-They are the major standard-setting
bodies that establish generally accepted accounting principles (GAAP).
FASB due process Correct Ans-It is the process through which the FASB develops and issues
accounting standards, involving research, public comment, and revisions before finalizing
standards.
Complete Solutions
Trial balance purpose Correct Ans-To verify that total debits equal total credits in the
accounting system.
Earnings per share (EPS) Correct Ans-EPS is calculated by (Net Income - Preferred
Dividends) / Weighted Average Number of Common Shares Outstanding.
Purpose of the statement of cash flows Correct Ans-To provide information about a
company's cash receipts and cash payments during a period.
Categories of business activities in the statement of cash flows Correct Ans-Operating,
investing, and financing.
Simple interest vs. compound interest Correct Ans-Simple interest is calculated on the
principal alone, while compound interest is calculated on both the principal and previously
earned interest.
Five-step revenue recognition model Correct Ans-1) Identify the contract, 2) Identify
performance obligations, 3) Determine transaction price, 4) Allocate transaction price, 5)
Recognize revenue when performance obligation is satisfied.
Deferred annuity Correct Ans-An annuity in which payments begin at a future date.
, Cash flows involved in bond valuation Correct Ans-Periodic interest payments (annuity) and
the principal repayment (single sum).
Liquidity measurement Correct Ans-The company's ability to meet short-term obligations,
measured by the current cash debt coverage ratio.
Free cash flow formula Correct Ans-Net cash provided by operating activities - capital
expenditures - cash dividends.
Normal balances for asset and expense accounts Correct Ans-Debit.
Normal balances for liabilities, equity, and revenue accounts Correct Ans-Credit.
Accrual basis of accounting Correct Ans-Revenue is recorded when earned, and expenses are
recorded when incurred, regardless of when cash is received or paid.
Role of SEC, FASB, AICPA, and IASB Correct Ans-They are the major standard-setting
bodies that establish generally accepted accounting principles (GAAP).
FASB due process Correct Ans-It is the process through which the FASB develops and issues
accounting standards, involving research, public comment, and revisions before finalizing
standards.
