CBAD 201 FINAL EXAM QUESTIONS
AND ANSWERS GRADED A+ 2025/2026
Net working capital:
a. should be the same for all companies
b. represents the company's ability to pay its long-term debts
c. is computed by subtracting total current liabilities from total current assets
d. should be a negative number to ensure the profitability of the company. - ANS c. is
computed by subtracting total current liabilities from total current assets
What type of business organization transacts much more business and is larger in terms of
assets, income, and number of employees?
a. partnership
b. limited liability company
c. corporation
d. proprietorship - ANS c. corporation
The accounting assumption that states that the business, rather than its owners, is the reporting
unit is the:
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,a. entity assumption
b. stable-monetary-unit assumption
c. going concern assumption
d. historical cost assumption - ANS a. entity assumption
The accounting equation can be stated as:
a. Assets = Liabilities - Stockholders' Equity
b. Assets -Liabilities = Stockholders' Equity
c. Assets + Stockholders' Equity = Liabilities
d. Assets - Stockholders' Equity + Liabilities = Zero - ANS b. Assets -Liabilities = Stockholders'
Equity
Which of the following statements is TRUE?
a. Dividends reduce retained earnings.
b. Dividends are expenses of a business.
c. Dividends reduce net income.
d. Dividends increase retained earnings. - ANS a. Dividends reduce retained earnings.
Which financial statement is dated at the moment in time when the accounting period ends?
a. Statement of retained earnings and income statement
b. Statement of cash flows
c. Balance sheet
d. Income statement - ANS c. Balance sheet
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, The Balance Sheet is used to prepare the:
a. Income Statement
b. Statement of Stockholders' Equity
c. Statement of Cash Flows
d. Statement of Retained Earnings - ANS c. Statement of Cash Flows
Which transaction decreases stockholders' equity?
a. sale of common stock
b. cash purchase of land
c. total expenses greater than total revenues for the period
d. total revenues greater than total expenses for the period - ANS c. total expenses greater
than total revenues for the period
Which of the following is NOT a business transaction?
a. A company buys goods on account.
b. A company sells land for cash.
c. A company borrows money from the bank.
d. A company fired 10 percent of the employees due to lackluster sales. - ANS d. A company
fired 10 percent of the employees due to lackluster sales.
A company performed services for a customer for cash. This transaction increased assets and:
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
AND ANSWERS GRADED A+ 2025/2026
Net working capital:
a. should be the same for all companies
b. represents the company's ability to pay its long-term debts
c. is computed by subtracting total current liabilities from total current assets
d. should be a negative number to ensure the profitability of the company. - ANS c. is
computed by subtracting total current liabilities from total current assets
What type of business organization transacts much more business and is larger in terms of
assets, income, and number of employees?
a. partnership
b. limited liability company
c. corporation
d. proprietorship - ANS c. corporation
The accounting assumption that states that the business, rather than its owners, is the reporting
unit is the:
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,a. entity assumption
b. stable-monetary-unit assumption
c. going concern assumption
d. historical cost assumption - ANS a. entity assumption
The accounting equation can be stated as:
a. Assets = Liabilities - Stockholders' Equity
b. Assets -Liabilities = Stockholders' Equity
c. Assets + Stockholders' Equity = Liabilities
d. Assets - Stockholders' Equity + Liabilities = Zero - ANS b. Assets -Liabilities = Stockholders'
Equity
Which of the following statements is TRUE?
a. Dividends reduce retained earnings.
b. Dividends are expenses of a business.
c. Dividends reduce net income.
d. Dividends increase retained earnings. - ANS a. Dividends reduce retained earnings.
Which financial statement is dated at the moment in time when the accounting period ends?
a. Statement of retained earnings and income statement
b. Statement of cash flows
c. Balance sheet
d. Income statement - ANS c. Balance sheet
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, The Balance Sheet is used to prepare the:
a. Income Statement
b. Statement of Stockholders' Equity
c. Statement of Cash Flows
d. Statement of Retained Earnings - ANS c. Statement of Cash Flows
Which transaction decreases stockholders' equity?
a. sale of common stock
b. cash purchase of land
c. total expenses greater than total revenues for the period
d. total revenues greater than total expenses for the period - ANS c. total expenses greater
than total revenues for the period
Which of the following is NOT a business transaction?
a. A company buys goods on account.
b. A company sells land for cash.
c. A company borrows money from the bank.
d. A company fired 10 percent of the employees due to lackluster sales. - ANS d. A company
fired 10 percent of the employees due to lackluster sales.
A company performed services for a customer for cash. This transaction increased assets and:
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
