ACCY 200 Exam 1 UIUC UPDATED Exam
Questions and CORRECT Answers
The balance sheet equation can be represented by: - CORRECT ANSWER - Assets =
Liabilities + Stockholders' Equity.
This accounting method accomplishes much of the matching of revenues and expenses? -
CORRECT ANSWER - Accrual accounting
A fiscal year: - CORRECT ANSWER - is frequently selected based on the firm's operating
cycle
Expenses are: - CORRECT ANSWER - decreases in net assets resulting from usual operating
activities
The going concern concept refers to a presumption that: - CORRECT ANSWER - the entity
will continue to operate in the foreseeable future.
A credit entry will: - CORRECT ANSWER - increase a liability account.
A debit entry will: - CORRECT ANSWER - increase the balance of an expense account.
The effect of an adjustment is: - CORRECT ANSWER - to increase the accuracy of the
financial statements.
An expanded version of the accounting equation could be: - CORRECT ANSWER - Assets =
Liabilities + Paid-in Capital + Beginning Retained Earnings + Revenues - Expenses - Dividends
When a manufacturer invests in short-term marketable securities: - CORRECT ANSWER -
risk avoidance is of great importance.
,Accounts receivable are reported at: - CORRECT ANSWER - net realizable value
The inventory cost flow assumption describes the flow of product cost: - CORRECT
ANSWER - into the asset (inventory) account and out to the expense (cost of goods sold)
account.
examples of an inventory account a manufacturing firm might use? - CORRECT ANSWER -
Finished goods inventory.
Work in process inventory.
Raw materials inventory.
The accrual of interest on short-term marketable securities results in: - CORRECT
ANSWER - an increase in current assets and an increase in net income.
When a firm uses the LIFO inventory cost flow assumption: - CORRECT ANSWER - There
is better matching of revenue and expense is achieved than under FIFO.
One of the principal reasons for selecting the LIFO cost flow assumption instead of the FIFO
cost flow assumption in an inflationary economic environment is that: - CORRECT
ANSWER - income taxes will be lower.
The accounting concept or principle applied when an allowance is provided for estimated
uncollectible accounts receivable is: - CORRECT ANSWER - matching revenue and expense.
Bad debt expense is recognized in the same accounting period as the revenue that is related to the
receivable because: - CORRECT ANSWER - all costs incurred in the current period should be
subtracted from current period revenues.
, Expenditures capitalized as long-lived assets generally include those expenditures that: -
CORRECT ANSWER - are material in amount and that have an economic benefit to the entity
that extends beyond the current year.
When a depreciable asset is sold: - CORRECT ANSWER - a gain arises if the sales proceeds
exceed the net book value.
The entry to record depreciation expense: - CORRECT ANSWER - increases a contra asset
and decreases net income.
This best describes the process of accounting for depreciation: - CORRECT ANSWER - A
process for recognizing the cost of an asset that should be matched against revenue earned as a
result of using the asset.
Goodwill is an asset that arises because the present value of an acquired company's estimated
future earnings, discounted at the acquiring firm's ROI: - CORRECT ANSWER - is more than
the fair value of the net assets of the acquired company.
The principal challenge to calculating depletion is estimating: - CORRECT ANSWER - the
quantity of material to be recovered.
The net book value of a depreciable asset is: - CORRECT ANSWER - the difference between
the asset's cost and accumulated depreciation.
Noncurrent, intangible assets such as leasehold improvements, patents, and copyrights are all
subject to: - CORRECT ANSWER - amortization
Many companies use accelerated depreciation for tax purposes because: - CORRECT
ANSWER - it results in lower taxable income than straight-line depreciation.
A transaction that is likely to cause an increase in a current liability is: - CORRECT
ANSWER - accrual of interest expense.
Questions and CORRECT Answers
The balance sheet equation can be represented by: - CORRECT ANSWER - Assets =
Liabilities + Stockholders' Equity.
This accounting method accomplishes much of the matching of revenues and expenses? -
CORRECT ANSWER - Accrual accounting
A fiscal year: - CORRECT ANSWER - is frequently selected based on the firm's operating
cycle
Expenses are: - CORRECT ANSWER - decreases in net assets resulting from usual operating
activities
The going concern concept refers to a presumption that: - CORRECT ANSWER - the entity
will continue to operate in the foreseeable future.
A credit entry will: - CORRECT ANSWER - increase a liability account.
A debit entry will: - CORRECT ANSWER - increase the balance of an expense account.
The effect of an adjustment is: - CORRECT ANSWER - to increase the accuracy of the
financial statements.
An expanded version of the accounting equation could be: - CORRECT ANSWER - Assets =
Liabilities + Paid-in Capital + Beginning Retained Earnings + Revenues - Expenses - Dividends
When a manufacturer invests in short-term marketable securities: - CORRECT ANSWER -
risk avoidance is of great importance.
,Accounts receivable are reported at: - CORRECT ANSWER - net realizable value
The inventory cost flow assumption describes the flow of product cost: - CORRECT
ANSWER - into the asset (inventory) account and out to the expense (cost of goods sold)
account.
examples of an inventory account a manufacturing firm might use? - CORRECT ANSWER -
Finished goods inventory.
Work in process inventory.
Raw materials inventory.
The accrual of interest on short-term marketable securities results in: - CORRECT
ANSWER - an increase in current assets and an increase in net income.
When a firm uses the LIFO inventory cost flow assumption: - CORRECT ANSWER - There
is better matching of revenue and expense is achieved than under FIFO.
One of the principal reasons for selecting the LIFO cost flow assumption instead of the FIFO
cost flow assumption in an inflationary economic environment is that: - CORRECT
ANSWER - income taxes will be lower.
The accounting concept or principle applied when an allowance is provided for estimated
uncollectible accounts receivable is: - CORRECT ANSWER - matching revenue and expense.
Bad debt expense is recognized in the same accounting period as the revenue that is related to the
receivable because: - CORRECT ANSWER - all costs incurred in the current period should be
subtracted from current period revenues.
, Expenditures capitalized as long-lived assets generally include those expenditures that: -
CORRECT ANSWER - are material in amount and that have an economic benefit to the entity
that extends beyond the current year.
When a depreciable asset is sold: - CORRECT ANSWER - a gain arises if the sales proceeds
exceed the net book value.
The entry to record depreciation expense: - CORRECT ANSWER - increases a contra asset
and decreases net income.
This best describes the process of accounting for depreciation: - CORRECT ANSWER - A
process for recognizing the cost of an asset that should be matched against revenue earned as a
result of using the asset.
Goodwill is an asset that arises because the present value of an acquired company's estimated
future earnings, discounted at the acquiring firm's ROI: - CORRECT ANSWER - is more than
the fair value of the net assets of the acquired company.
The principal challenge to calculating depletion is estimating: - CORRECT ANSWER - the
quantity of material to be recovered.
The net book value of a depreciable asset is: - CORRECT ANSWER - the difference between
the asset's cost and accumulated depreciation.
Noncurrent, intangible assets such as leasehold improvements, patents, and copyrights are all
subject to: - CORRECT ANSWER - amortization
Many companies use accelerated depreciation for tax purposes because: - CORRECT
ANSWER - it results in lower taxable income than straight-line depreciation.
A transaction that is likely to cause an increase in a current liability is: - CORRECT
ANSWER - accrual of interest expense.
