HBX- FINAL EXAM -FINANCIAL
ACCOUNTING- (2026-2027) ACTUAL
QUESTIONS AND ANSWERS
Address You, a fancy dress manufacturer, sold a dress for $8,000 on credit. The
cost of producing this dress was $1,000. First, how would the revenue and
receivable from this transaction impact the accounting equation of Address You?
Please enter the amounts in the boxes below.
At the same time, how will the related expense from this transaction impact the
accounting equation of Address You? - ANSWER-Increase $8K Assets= Liabilities+
Increase $8k Owners' Equity
Decrease $1K Assets= Liabilities+ Decrease $1K Owners' Equity
We Like to Rock (WLR), a granite countertop manufacturer, delivered 5 countertops
at $2,000 each to their client. The cost of producing the countertops was $500 each.
The client paid cash for the countertops. First, how would the revenue from this
transaction impact the accounting equation for WLR?
At the same time, how will the related expense from this transaction impact the
accounting equation of WLR? - ANSWER-Increase $10K Assets= Liabilities+
Increase $10k Owners' Equity
Decrease $2.5K= Liabilities+ Decrease $2.5K Owners' Equity
Jarvard University Bookstore paid $67,000 for books purchased on credit in the
previous month. How would this payment impact the accounting equation? -
ANSWER-Decrease $67K Assets= Decrease $67K Liabilities+ Owners' Equity
Which of the following demonstrates the historical cost principle?
A. John is wondering which method of accounting for inventory in his bike shop
would be most appropriate. He decides that he should use the same method that he
has been using for the last few years, since his business has been operating
essentially the same way. (Example of Consistency)
B. Real Estate prices in Orderville have increased dramatically over the last five
years. Although the land under Chad's office building is currently believed to be
worth $500,000, it is recorded at $250,000 because that is the price he paid for it.
(The idea that assets are recorded at their original cost underlies the historical cost
principle, so the land under Chad's office being recorded at the price he paid for it is
an example of the historical cost principle.)
C.Shelley's Automotive received a large order from a customer, who prepaid the
entire amount. Shell - ANSWER-B. Real Estate prices in Orderville have increased
,dramatically over the last five years. Although the land under Chad's office building is
currently believed to be worth $500,000, it is recorded at $250,000 because that is
the price he paid for it.
(The idea that assets are recorded at their original cost underlies the historical cost
principle, so the land under Chad's office being recorded at the price he paid for it is
an example of the historical cost principle.)
Here are some of the accounts that Company F has on their books:
Cash and Cash Equivalents$2,000
Insurance Expense$250
Accounts Payable $800
Prepaid Rent$400
Accounts Receivable$750
Deferred Revenue$1,650
Inventory$925
Which of the amounts below is the correct total of liabilities? - ANSWER-The correct
answer is $2,450, which includes:
Accounts Payable$800
Deferred Revenue$1,650
Breeze Inc. receives payment of $800,000 for 4 wind turbines that were delivered
and invoiced on credit in the previous month. How would this receipt impact the
accounting equation of Breeze Inc.? Select all that apply. - ANSWER-Increase
$800K Assets & Decrease $800k Assets= Liabilities+ Owners' Equity
Here are some of the accounts that Company F has on their books:
Cash and Cash Equivalents$2,000
Insurance Expense$250
Accounts Payable$800
Prepaid Rent$400
Accounts Receivable$750
Deferred Revenue$1,650
Inventory$925
Which of the amounts below is the correct total of assets? - ANSWER-The correct
answer is $4,075, which includes:
Cash and Cash Equivalents$2,000
Prepaid Rent$400
Accounts Receivable$750
Inventory$925
Which of the following demonstrates the going concern concept?
A. AQG Industries sold $20,000 of product on credit to SSA Manufacturing. SSA did
not pay on time. AQG decides that it is fruitless to pursue collection so they write off
the receivable from SSA.
B. Gail's Garments has been in business for 20 years and during that period the
company has gained a good reputation. Gail would like the Controller to
, acknowledge the value of that reputation by including it as an asset worth $100,000
but the controller says she cannot do it.
C. AQG Industries purchases $20,000 of product on credit from RSI Manufacturing.
AQG records the purchase as an increase in inventory and an increase in accounts
payable. AQG feels that they will be able to realize the value from the inventory and
settle the obligation to RSI in the weeks to come. - ANSWER-C. AQG Industries
purchases $20,000 of product on credit from RSI Manufacturing. AQG records the
purchase as an increase in inventory and an increase in accounts payable. AQG
feels that they will be able to realize the value from the inventory and settle the
obligation to RSI in the weeks to come.
The idea that a company will be able to realize the benefits from its assets and settle
any obligations from its liabilities underlies the going concern concept, so this
description of AQG recording the transaction with RSI is an example of the going
concern concept.
Perfect Printers is able to obtain 30 days credit terms to purchase a heavy duty
printing machine for $200,000. How will this purchase impact the accounting
equation of Perfect Printers at the time of the purchase? Select all that apply. -
ANSWER-Increase $200K Assets= Increase $200K Liabilities+ Owners' Equity
Assets increase by $200,000 because the company now has a machine, and
liabilities increase by $200,000 because the company now has the obligation to pay
for the machine within 30 days.
See each answer option for more detail.
Which of the following would cause a decrease to liabilities? Select all that apply.
A. company pays $550, which is the current portion due on a long term bank loan
B. A company sells $1,000 worth of gift cards
(This event would cause an increase in cash and an increase in deferred revenue.)
C. A company prepays for 12 months of landscaping services
(This event does not impact liabilities. It would cause a decrease in cash and an
increase in prepaid expense.)
D. A company pays off the remaining amount of their mortgage loan
This event would cause a decrease in cash and a decrease in mortgage loan
payable, which is a liability account.
E. After one month, a company recognizes revenue equal to 1/12 of an annual
magazine subscription they sold to a customer
This event would cause a decrease in deferred revenue, a liability account, and an
increase in subscription revenue. - ANSWER-A.A company pays $550, which is the
current portion due on a long term bank loan
(This event would cause a decrease in cash and a decrease in notes payable, which
is a liability account.)
ACCOUNTING- (2026-2027) ACTUAL
QUESTIONS AND ANSWERS
Address You, a fancy dress manufacturer, sold a dress for $8,000 on credit. The
cost of producing this dress was $1,000. First, how would the revenue and
receivable from this transaction impact the accounting equation of Address You?
Please enter the amounts in the boxes below.
At the same time, how will the related expense from this transaction impact the
accounting equation of Address You? - ANSWER-Increase $8K Assets= Liabilities+
Increase $8k Owners' Equity
Decrease $1K Assets= Liabilities+ Decrease $1K Owners' Equity
We Like to Rock (WLR), a granite countertop manufacturer, delivered 5 countertops
at $2,000 each to their client. The cost of producing the countertops was $500 each.
The client paid cash for the countertops. First, how would the revenue from this
transaction impact the accounting equation for WLR?
At the same time, how will the related expense from this transaction impact the
accounting equation of WLR? - ANSWER-Increase $10K Assets= Liabilities+
Increase $10k Owners' Equity
Decrease $2.5K= Liabilities+ Decrease $2.5K Owners' Equity
Jarvard University Bookstore paid $67,000 for books purchased on credit in the
previous month. How would this payment impact the accounting equation? -
ANSWER-Decrease $67K Assets= Decrease $67K Liabilities+ Owners' Equity
Which of the following demonstrates the historical cost principle?
A. John is wondering which method of accounting for inventory in his bike shop
would be most appropriate. He decides that he should use the same method that he
has been using for the last few years, since his business has been operating
essentially the same way. (Example of Consistency)
B. Real Estate prices in Orderville have increased dramatically over the last five
years. Although the land under Chad's office building is currently believed to be
worth $500,000, it is recorded at $250,000 because that is the price he paid for it.
(The idea that assets are recorded at their original cost underlies the historical cost
principle, so the land under Chad's office being recorded at the price he paid for it is
an example of the historical cost principle.)
C.Shelley's Automotive received a large order from a customer, who prepaid the
entire amount. Shell - ANSWER-B. Real Estate prices in Orderville have increased
,dramatically over the last five years. Although the land under Chad's office building is
currently believed to be worth $500,000, it is recorded at $250,000 because that is
the price he paid for it.
(The idea that assets are recorded at their original cost underlies the historical cost
principle, so the land under Chad's office being recorded at the price he paid for it is
an example of the historical cost principle.)
Here are some of the accounts that Company F has on their books:
Cash and Cash Equivalents$2,000
Insurance Expense$250
Accounts Payable $800
Prepaid Rent$400
Accounts Receivable$750
Deferred Revenue$1,650
Inventory$925
Which of the amounts below is the correct total of liabilities? - ANSWER-The correct
answer is $2,450, which includes:
Accounts Payable$800
Deferred Revenue$1,650
Breeze Inc. receives payment of $800,000 for 4 wind turbines that were delivered
and invoiced on credit in the previous month. How would this receipt impact the
accounting equation of Breeze Inc.? Select all that apply. - ANSWER-Increase
$800K Assets & Decrease $800k Assets= Liabilities+ Owners' Equity
Here are some of the accounts that Company F has on their books:
Cash and Cash Equivalents$2,000
Insurance Expense$250
Accounts Payable$800
Prepaid Rent$400
Accounts Receivable$750
Deferred Revenue$1,650
Inventory$925
Which of the amounts below is the correct total of assets? - ANSWER-The correct
answer is $4,075, which includes:
Cash and Cash Equivalents$2,000
Prepaid Rent$400
Accounts Receivable$750
Inventory$925
Which of the following demonstrates the going concern concept?
A. AQG Industries sold $20,000 of product on credit to SSA Manufacturing. SSA did
not pay on time. AQG decides that it is fruitless to pursue collection so they write off
the receivable from SSA.
B. Gail's Garments has been in business for 20 years and during that period the
company has gained a good reputation. Gail would like the Controller to
, acknowledge the value of that reputation by including it as an asset worth $100,000
but the controller says she cannot do it.
C. AQG Industries purchases $20,000 of product on credit from RSI Manufacturing.
AQG records the purchase as an increase in inventory and an increase in accounts
payable. AQG feels that they will be able to realize the value from the inventory and
settle the obligation to RSI in the weeks to come. - ANSWER-C. AQG Industries
purchases $20,000 of product on credit from RSI Manufacturing. AQG records the
purchase as an increase in inventory and an increase in accounts payable. AQG
feels that they will be able to realize the value from the inventory and settle the
obligation to RSI in the weeks to come.
The idea that a company will be able to realize the benefits from its assets and settle
any obligations from its liabilities underlies the going concern concept, so this
description of AQG recording the transaction with RSI is an example of the going
concern concept.
Perfect Printers is able to obtain 30 days credit terms to purchase a heavy duty
printing machine for $200,000. How will this purchase impact the accounting
equation of Perfect Printers at the time of the purchase? Select all that apply. -
ANSWER-Increase $200K Assets= Increase $200K Liabilities+ Owners' Equity
Assets increase by $200,000 because the company now has a machine, and
liabilities increase by $200,000 because the company now has the obligation to pay
for the machine within 30 days.
See each answer option for more detail.
Which of the following would cause a decrease to liabilities? Select all that apply.
A. company pays $550, which is the current portion due on a long term bank loan
B. A company sells $1,000 worth of gift cards
(This event would cause an increase in cash and an increase in deferred revenue.)
C. A company prepays for 12 months of landscaping services
(This event does not impact liabilities. It would cause a decrease in cash and an
increase in prepaid expense.)
D. A company pays off the remaining amount of their mortgage loan
This event would cause a decrease in cash and a decrease in mortgage loan
payable, which is a liability account.
E. After one month, a company recognizes revenue equal to 1/12 of an annual
magazine subscription they sold to a customer
This event would cause a decrease in deferred revenue, a liability account, and an
increase in subscription revenue. - ANSWER-A.A company pays $550, which is the
current portion due on a long term bank loan
(This event would cause a decrease in cash and a decrease in notes payable, which
is a liability account.)
