LIBERTY UNIVERSITY ACCT 212 FINAL EXAM STUDY GUIDE | PRINCIPLES OF ACCOUNTING
PRACTICE QUESTIONS & ANSWERS 2026/2027
Horizontal Analysis (side-by-side) - ANS ✔✔compare year to year analysis of each account's
dollar amount changes and percentage changes; dollar change=current year minus previous
year; %change= dollar change/previous year
Vertical Analysis of Balance Sheet - ANS ✔✔each item is stated as a percent of total assets.
Vertical Analysis of Income Statement - ANS ✔✔account balance/net sales
ratio analysis - ANS ✔✔the assessment of a firm's financial condition using calculations and
interpretations of financial ratios developed from the firm's financial statements
current ratio - ANS ✔✔current assets/current liabilities
acid-test ratio - ANS ✔✔(Current Assets - Inventory) / Current Liabilities
total asset turnover - ANS ✔✔net sales/average total assets
A/R turnover - ANS ✔✔Sales/Average A/R, net
Days' sales uncollected - ANS ✔✔365 / A/R Turnover
inventory turnover - ANS ✔✔COGS/Average Inventory
debt-to-equity ratio - ANS ✔✔total liabilities/total equity
,times interest earned - ANS ✔✔EBIT/ interest expense
profit margin - ANS ✔✔net income/net sales
return on assets - ANS ✔✔net income/average total assets
working capital - ANS ✔✔current assets-current liabilities
fixed costs - ANS ✔✔costs that remain constant as output changes
variable costs - ANS ✔✔costs that vary directly with the level of production
direct costs - ANS ✔✔Costs that can be specifically identified with a particular project or
activity.
indirect costs - ANS ✔✔Costs that cannot be easily and accurately traced to a cost object.
schedule of cost of goods manufactured - ANS ✔✔Direct Materials used
+Direct Labor
+Factory Overhead
=total manufacturing cost
+beginning WIP
-ending WIP
=COGM
, direct labor - ANS ✔✔the work of factory employees that can be physically and directly
associated with converting raw materials into finished goods
indirect labor - ANS ✔✔The labor costs of janitors, supervisors, materials handlers, and other
factory workers that cannot be conveniently traced to particular products.
prime cost - ANS ✔✔Direct Materials + Direct Labor
factory overhead - ANS ✔✔manufacturing costs that are not raw material or direct labor costs
(depreciation, rent, insurance, utilities, etc.)
Inventory to COGS - ANS ✔✔Raw material inventory+purchases-RM used(also called
DM)=ending RM inventory
WIP beginning+DM+DL+FOH-Ending WIP=COGM
Finished Goods+COGM-Ending Finished Goods=COGS
total quality management - ANS ✔✔managing the entire organization so that it excels on all
dimensions of products and services that are important to the customer
process cost - ANS ✔✔the total cost incurred in producing and delivering outputs
job costs - ANS ✔✔customizable
build to order - ANS ✔✔manufacturing a product only when there is an order from a customer
Predetermined Overhead Rate - ANS ✔✔estimates cost of a job and is calculated by
total estimate overhead/total estimated activity base
PRACTICE QUESTIONS & ANSWERS 2026/2027
Horizontal Analysis (side-by-side) - ANS ✔✔compare year to year analysis of each account's
dollar amount changes and percentage changes; dollar change=current year minus previous
year; %change= dollar change/previous year
Vertical Analysis of Balance Sheet - ANS ✔✔each item is stated as a percent of total assets.
Vertical Analysis of Income Statement - ANS ✔✔account balance/net sales
ratio analysis - ANS ✔✔the assessment of a firm's financial condition using calculations and
interpretations of financial ratios developed from the firm's financial statements
current ratio - ANS ✔✔current assets/current liabilities
acid-test ratio - ANS ✔✔(Current Assets - Inventory) / Current Liabilities
total asset turnover - ANS ✔✔net sales/average total assets
A/R turnover - ANS ✔✔Sales/Average A/R, net
Days' sales uncollected - ANS ✔✔365 / A/R Turnover
inventory turnover - ANS ✔✔COGS/Average Inventory
debt-to-equity ratio - ANS ✔✔total liabilities/total equity
,times interest earned - ANS ✔✔EBIT/ interest expense
profit margin - ANS ✔✔net income/net sales
return on assets - ANS ✔✔net income/average total assets
working capital - ANS ✔✔current assets-current liabilities
fixed costs - ANS ✔✔costs that remain constant as output changes
variable costs - ANS ✔✔costs that vary directly with the level of production
direct costs - ANS ✔✔Costs that can be specifically identified with a particular project or
activity.
indirect costs - ANS ✔✔Costs that cannot be easily and accurately traced to a cost object.
schedule of cost of goods manufactured - ANS ✔✔Direct Materials used
+Direct Labor
+Factory Overhead
=total manufacturing cost
+beginning WIP
-ending WIP
=COGM
, direct labor - ANS ✔✔the work of factory employees that can be physically and directly
associated with converting raw materials into finished goods
indirect labor - ANS ✔✔The labor costs of janitors, supervisors, materials handlers, and other
factory workers that cannot be conveniently traced to particular products.
prime cost - ANS ✔✔Direct Materials + Direct Labor
factory overhead - ANS ✔✔manufacturing costs that are not raw material or direct labor costs
(depreciation, rent, insurance, utilities, etc.)
Inventory to COGS - ANS ✔✔Raw material inventory+purchases-RM used(also called
DM)=ending RM inventory
WIP beginning+DM+DL+FOH-Ending WIP=COGM
Finished Goods+COGM-Ending Finished Goods=COGS
total quality management - ANS ✔✔managing the entire organization so that it excels on all
dimensions of products and services that are important to the customer
process cost - ANS ✔✔the total cost incurred in producing and delivering outputs
job costs - ANS ✔✔customizable
build to order - ANS ✔✔manufacturing a product only when there is an order from a customer
Predetermined Overhead Rate - ANS ✔✔estimates cost of a job and is calculated by
total estimate overhead/total estimated activity base
