ACCOUNTING 101 FINAL EXAM ACTUAL QUESTIONS
AND SOLUTIONS RATED A+
✔✔The payment of a liab - ✔✔decreases assets and liabs
✔✔A credit is not the normal balance for? - ✔✔dividends account
✔✔The classification and normal balance of the dividend is - ✔✔stockholders' equity
with a debit balance
✔✔Describe the classification and normal balance of the RE account - ✔✔stockholders'
equity, credit
✔✔Describe the classification and normal balance of the unearned rev account -
✔✔liability, credit
✔✔Expanded basic accounting equation -
✔✔assets+dividends+expenses=liabilities+common stock+revenues
✔✔Multistep income statement: Interest income - ✔✔other revs and expenses
✔✔Multistep income statement: Sales returns and allowances - ✔✔revenues
✔✔Multistep income statement: Company president's salary - ✔✔operating expense
✔✔Multistep income statement: Utilities expense for store - ✔✔operating expense
✔✔Multistep income statement: Purchases - ✔✔COGS
✔✔Multistep income statement: Freight out - ✔✔operating expenses
✔✔Multistep income statement: Office salaries expense for headquarters - ✔✔operating
expense
✔✔FIFO - ✔✔first in, first out
oldest goods purchased are first to be sold
generally most realistic ending inventory figure
✔✔LIFO - ✔✔last in, first out
better matches current cost to current selling prices
period of rising prices-- lowest balance sheet figure for inventory; lowest gross margin
figure; best to use for tax purposes
✔✔Asset - ✔✔cash income/ help create revenue
, resources owned by the business that add economic value
✔✔Liability - ✔✔obligations that have to be repaid/ debts
accounts payable
unearned revenue
✔✔Owner's equity - ✔✔capital stock: what's invested in the company
retained earnings: income of the company left in the business and not paid to the
shareholders
✔✔ASSETS + STOCKHOLDERS' EQUITY = - ✔✔ASSETS
✔✔REVENUES - EXPENSES= - ✔✔NET INCOME
✔✔Revenue - ✔✔sales, money coming in, money earned in assets and liabilities
✔✔Expenses - ✔✔money going out to produce revenue, cost of assets consumed, cost
of services used in the process of generating revenue
✔✔Dividends - ✔✔are good (always subtract)
return of income to shareholders
comes out of Retained Earnings
✔✔ENDING RETAINED EARNINGS = - ✔✔BEGINNING RE + NET INCOME -
DIVIDENDS
✔✔TOTAL STOCKHOLDERS' EQUITY = - ✔✔CAPITAL STOCK + RE
ASSETS - LIABILITIES
✔✔Liquidity - ✔✔how easily it can be converted to cash
✔✔Non-current assets - ✔✔take longer than one year to convert to cash or assets not
intended to be turned into cash
ex: property plant and equipment-- buildings, machinery, land in use
order from smallest--> largest
✔✔Current assets - ✔✔assets a company expects to convert to cash
use up in 1 yr operating cycle
ex: cash, debt investments, accounts receivable, inventory, prepaid supplies/ insurance
order smallest--> largest
✔✔Current liabilities - ✔✔pay off debt/ obligations in 1 yr or operating cycle
ex: accounts payable or current portion of notes payable
unearned revenue
AND SOLUTIONS RATED A+
✔✔The payment of a liab - ✔✔decreases assets and liabs
✔✔A credit is not the normal balance for? - ✔✔dividends account
✔✔The classification and normal balance of the dividend is - ✔✔stockholders' equity
with a debit balance
✔✔Describe the classification and normal balance of the RE account - ✔✔stockholders'
equity, credit
✔✔Describe the classification and normal balance of the unearned rev account -
✔✔liability, credit
✔✔Expanded basic accounting equation -
✔✔assets+dividends+expenses=liabilities+common stock+revenues
✔✔Multistep income statement: Interest income - ✔✔other revs and expenses
✔✔Multistep income statement: Sales returns and allowances - ✔✔revenues
✔✔Multistep income statement: Company president's salary - ✔✔operating expense
✔✔Multistep income statement: Utilities expense for store - ✔✔operating expense
✔✔Multistep income statement: Purchases - ✔✔COGS
✔✔Multistep income statement: Freight out - ✔✔operating expenses
✔✔Multistep income statement: Office salaries expense for headquarters - ✔✔operating
expense
✔✔FIFO - ✔✔first in, first out
oldest goods purchased are first to be sold
generally most realistic ending inventory figure
✔✔LIFO - ✔✔last in, first out
better matches current cost to current selling prices
period of rising prices-- lowest balance sheet figure for inventory; lowest gross margin
figure; best to use for tax purposes
✔✔Asset - ✔✔cash income/ help create revenue
, resources owned by the business that add economic value
✔✔Liability - ✔✔obligations that have to be repaid/ debts
accounts payable
unearned revenue
✔✔Owner's equity - ✔✔capital stock: what's invested in the company
retained earnings: income of the company left in the business and not paid to the
shareholders
✔✔ASSETS + STOCKHOLDERS' EQUITY = - ✔✔ASSETS
✔✔REVENUES - EXPENSES= - ✔✔NET INCOME
✔✔Revenue - ✔✔sales, money coming in, money earned in assets and liabilities
✔✔Expenses - ✔✔money going out to produce revenue, cost of assets consumed, cost
of services used in the process of generating revenue
✔✔Dividends - ✔✔are good (always subtract)
return of income to shareholders
comes out of Retained Earnings
✔✔ENDING RETAINED EARNINGS = - ✔✔BEGINNING RE + NET INCOME -
DIVIDENDS
✔✔TOTAL STOCKHOLDERS' EQUITY = - ✔✔CAPITAL STOCK + RE
ASSETS - LIABILITIES
✔✔Liquidity - ✔✔how easily it can be converted to cash
✔✔Non-current assets - ✔✔take longer than one year to convert to cash or assets not
intended to be turned into cash
ex: property plant and equipment-- buildings, machinery, land in use
order from smallest--> largest
✔✔Current assets - ✔✔assets a company expects to convert to cash
use up in 1 yr operating cycle
ex: cash, debt investments, accounts receivable, inventory, prepaid supplies/ insurance
order smallest--> largest
✔✔Current liabilities - ✔✔pay off debt/ obligations in 1 yr or operating cycle
ex: accounts payable or current portion of notes payable
unearned revenue
