C214 STUDY GUIDE
PRETEST QUESTIONS
AND CORRECT ANSWERS
GRADED A+ 2025-2026
1. Trading on the NYSE is executed without a specialist (i.e. a market maker). (T or F) -
ANS-1. False.
2. Stocks and bonds are two types of financial instruments (T or F) - ANS-2. True.
3. The matching principle in accrual accounting requires that:
a. Revenues be recognized when the earnings process is complete and matches
expenses to revenues recognized.
b. Expenses are matched to the year in which they are incurred
c. Revenues are matched to the year in which they are booked
d. Revenues should be large enough to match expenses - ANS-3. a. Revenues be
recognized when the earnings process is complete and matches expenses to revenues
recognized.
4. A high-quality customer just purchased $500,000 worth of product from your
company. The contract calls for immediate delivery of the product with a cash
payment of $300,000 today and $200,000 to be paid 60 days. The expense associated
with the product is $300,000, of which $100,000 has not been paid to your supplier.
Under accrual based accounting system, you will most likely report:
a. revenues of $300,000 and expenses of $300,000.
b. revenues of $300,000 and expenses of $200,000.
c. revenues of $500,000 and expenses of $300,000.
, d. revenues of $500,000 and expenses of $200,000. - ANS-c. revenues of $500,000 and
expenses of $300,000.
5. A firm reported retained earnings of $300 in 12/31/20x2. For 12/31/20x3, the firm
reports retained earnings of $400 and pays dividends of $25. What was net income in
20x3?
a. 300
b. 400
c. 125
d. 100 - ANS-c. Net income = 400 - 300 + 25 = 125.
6. The basic equation for the balance sheet is:
a. Equity = Assets - Liabilities
b. Liabilities = Equity + Assets
c. Assets = Liabilities - Equity
d. Assets = Equity - Liabilities - ANS-a. Equity = Assets - Liabilities.
7. Intel reported the following for 2014:
Net Income 100,000
Depreciation 20,000
Change in A/R 10,000
What is the cash flow from operating activities
a. 100,000
b. 110,000
c. 120,000
d. (130,000) - ANS-b. CFO = 100,000 + 20,000 - 10,000 = 110,000.
8. Intel reported the following for 2014:
PRETEST QUESTIONS
AND CORRECT ANSWERS
GRADED A+ 2025-2026
1. Trading on the NYSE is executed without a specialist (i.e. a market maker). (T or F) -
ANS-1. False.
2. Stocks and bonds are two types of financial instruments (T or F) - ANS-2. True.
3. The matching principle in accrual accounting requires that:
a. Revenues be recognized when the earnings process is complete and matches
expenses to revenues recognized.
b. Expenses are matched to the year in which they are incurred
c. Revenues are matched to the year in which they are booked
d. Revenues should be large enough to match expenses - ANS-3. a. Revenues be
recognized when the earnings process is complete and matches expenses to revenues
recognized.
4. A high-quality customer just purchased $500,000 worth of product from your
company. The contract calls for immediate delivery of the product with a cash
payment of $300,000 today and $200,000 to be paid 60 days. The expense associated
with the product is $300,000, of which $100,000 has not been paid to your supplier.
Under accrual based accounting system, you will most likely report:
a. revenues of $300,000 and expenses of $300,000.
b. revenues of $300,000 and expenses of $200,000.
c. revenues of $500,000 and expenses of $300,000.
, d. revenues of $500,000 and expenses of $200,000. - ANS-c. revenues of $500,000 and
expenses of $300,000.
5. A firm reported retained earnings of $300 in 12/31/20x2. For 12/31/20x3, the firm
reports retained earnings of $400 and pays dividends of $25. What was net income in
20x3?
a. 300
b. 400
c. 125
d. 100 - ANS-c. Net income = 400 - 300 + 25 = 125.
6. The basic equation for the balance sheet is:
a. Equity = Assets - Liabilities
b. Liabilities = Equity + Assets
c. Assets = Liabilities - Equity
d. Assets = Equity - Liabilities - ANS-a. Equity = Assets - Liabilities.
7. Intel reported the following for 2014:
Net Income 100,000
Depreciation 20,000
Change in A/R 10,000
What is the cash flow from operating activities
a. 100,000
b. 110,000
c. 120,000
d. (130,000) - ANS-b. CFO = 100,000 + 20,000 - 10,000 = 110,000.
8. Intel reported the following for 2014:
