ACCY 201 FINAL EXAM 3 2026 EXAM REVIEW
SOLVED QUESTIONS AND CORRECT
ANSWERS GRADED A+
◉ Which of the following best describes accounting?
A) is used only for filling out tax returns and for financial statements
for various types of governmental reporting requirements
B) records economic data but does not communicate the data to
users according to any specific rules
C) is of no use by individuals outside of the business
D) is an information system that provides reports to users regarding
economic activities and condition of a business.
Answer: D) is an information system that provides reports to users
regarding economic activities and condition of a business
◉ Ramos Repair Company is paying a cash dividend. How does this
transaction affect Ramos Repair Company's accounting equation?
A) decrease in assets (Cash) and decrease in liabilities (Accounts
Payable)
B) increase in assets (Accounts Receivable) and decrease in assets
(Cash)
C) decrease in assets (Cash) and decrease in stockholders' equity
(Dividends)
,D) increase in assets (Cash) and decrease in stockholders' equity
(Dividends).
Answer: C.) decrease in assets (Cash) and decrease in stockholders'
equity (Dividends)
◉ Computer Corporation is starting its computer programming
business and has sold stock of $15,000. Identify how the accounting
equation will be affected.
A) increase in assets (Accounts Receivable) and decrease in
liabilities (Accounts Payable)
B) increase in assets (Cash) and increase in assets (Accounts
Receivable)
C) increase in assets (Cash) and increase in stockholders' equity
(Common Stock)
D) increase in assets (Cash) and increase in liabilities (Accounts
Payable).
Answer: C) increase in assets (Cash) and increase in stockholders'
equity (Common Stock)
◉ Within the United States, the dominant body in the primary
development of accounting principles is the
A) Institute of Management Accountants (IMA)
B) Financial Accounting Standards Board (FASB)
C) American Institute of Certified Public Accountants (AICPA)
,D) American Accounting Association (AAA).
Answer: B) Financial Accounting Standards Board (FASB)
◉ Which of the following accounts is a liability?
A) Wages Expense
B) Accounts Payable.
C) Accounts Receivable
D) Service Revenue.
Answer: B) Accounts Payable
◉ Question Content Area
Which of the following statements regarding the ratio of liabilities to
stockholders' equity is not true?
A) Sole proprietorships can use this ratio but substitute total
owner's equity for total stockholders' equity.
B) A ratio of 1 indicates that liabilities equal stockholders' equity.
C) The higher this ratio, the better able a business is to withstand
poor business conditions and pay creditors.
D) The lower this ratio, the better able a business is to withstand
poor business conditions and pay creditors..
Answer: C) The higher this ratio, the better able a business is to
withstand poor business conditions and pay creditors.
, ◉ Which of the following is not true of accounting principles?
A) A new accounting principle can be adopted with stockholders'
approval.
B) Following GAAP allows accounting information users to compare
one company to another.
C) Financial accountants follow generally accepted accounting
principles (GAAP).
D) The Financial Accounting Standards Board (FASB) has primary
responsibility for developing accounting principles..
Answer: A) A new accounting principle can be adopted with
stockholders' approval.
◉ Question Content Area
Donner Company is selling a piece of land adjacent to its business
premises. An appraisal reported the market value of the land to be
$95,000. The Focus Company initially offered to buy the land for
$113,000. The companies settled on a purchase price of $212,000.
On the same day, another piece of land on the same block sold for
$105,000. Under the cost principle, at what amount should the land
be recorded in the accounting records of Focus Company?
A) $212,000
B) $105,000
C) $95,000
D) $113,000.
Answer: A) $212,000
SOLVED QUESTIONS AND CORRECT
ANSWERS GRADED A+
◉ Which of the following best describes accounting?
A) is used only for filling out tax returns and for financial statements
for various types of governmental reporting requirements
B) records economic data but does not communicate the data to
users according to any specific rules
C) is of no use by individuals outside of the business
D) is an information system that provides reports to users regarding
economic activities and condition of a business.
Answer: D) is an information system that provides reports to users
regarding economic activities and condition of a business
◉ Ramos Repair Company is paying a cash dividend. How does this
transaction affect Ramos Repair Company's accounting equation?
A) decrease in assets (Cash) and decrease in liabilities (Accounts
Payable)
B) increase in assets (Accounts Receivable) and decrease in assets
(Cash)
C) decrease in assets (Cash) and decrease in stockholders' equity
(Dividends)
,D) increase in assets (Cash) and decrease in stockholders' equity
(Dividends).
Answer: C.) decrease in assets (Cash) and decrease in stockholders'
equity (Dividends)
◉ Computer Corporation is starting its computer programming
business and has sold stock of $15,000. Identify how the accounting
equation will be affected.
A) increase in assets (Accounts Receivable) and decrease in
liabilities (Accounts Payable)
B) increase in assets (Cash) and increase in assets (Accounts
Receivable)
C) increase in assets (Cash) and increase in stockholders' equity
(Common Stock)
D) increase in assets (Cash) and increase in liabilities (Accounts
Payable).
Answer: C) increase in assets (Cash) and increase in stockholders'
equity (Common Stock)
◉ Within the United States, the dominant body in the primary
development of accounting principles is the
A) Institute of Management Accountants (IMA)
B) Financial Accounting Standards Board (FASB)
C) American Institute of Certified Public Accountants (AICPA)
,D) American Accounting Association (AAA).
Answer: B) Financial Accounting Standards Board (FASB)
◉ Which of the following accounts is a liability?
A) Wages Expense
B) Accounts Payable.
C) Accounts Receivable
D) Service Revenue.
Answer: B) Accounts Payable
◉ Question Content Area
Which of the following statements regarding the ratio of liabilities to
stockholders' equity is not true?
A) Sole proprietorships can use this ratio but substitute total
owner's equity for total stockholders' equity.
B) A ratio of 1 indicates that liabilities equal stockholders' equity.
C) The higher this ratio, the better able a business is to withstand
poor business conditions and pay creditors.
D) The lower this ratio, the better able a business is to withstand
poor business conditions and pay creditors..
Answer: C) The higher this ratio, the better able a business is to
withstand poor business conditions and pay creditors.
, ◉ Which of the following is not true of accounting principles?
A) A new accounting principle can be adopted with stockholders'
approval.
B) Following GAAP allows accounting information users to compare
one company to another.
C) Financial accountants follow generally accepted accounting
principles (GAAP).
D) The Financial Accounting Standards Board (FASB) has primary
responsibility for developing accounting principles..
Answer: A) A new accounting principle can be adopted with
stockholders' approval.
◉ Question Content Area
Donner Company is selling a piece of land adjacent to its business
premises. An appraisal reported the market value of the land to be
$95,000. The Focus Company initially offered to buy the land for
$113,000. The companies settled on a purchase price of $212,000.
On the same day, another piece of land on the same block sold for
$105,000. Under the cost principle, at what amount should the land
be recorded in the accounting records of Focus Company?
A) $212,000
B) $105,000
C) $95,000
D) $113,000.
Answer: A) $212,000
